In this crazy world of this Iran-U.S. conflict, Iran continues to talk tough while supposedly tough talks are going on with the regime at the same time, even as many believe that these talks will once again be fruitless. Reports are saying that talks aim to address implementation of the U.S.-Iran memorandum of understanding and issues that triggered the recent U.S.-Iran escalation, including disputes over navigation in the Strait of Hormuz. They say that Qatari negotiators are in Iran to meet Iranian officials in an effort to de-escalate tensions and create conditions for broader negotiations to continue; talks conducted in coordination with the U.S., according to a source with knowledge. Better than a source with no knowledge.
Amazingly though, prices are coming down after a spike near $76 a barrel, even as the Strait of Hormuz was effectively shut down once again, mainly on confidence that the United States military strength will not allow the Strait of Hormuz to be shut down for an extended period of time. Based upon some of the physical cash prices that we’ve seen in Asia and the Middle East, the reopening of the Strait of Hormuz combined with previous releases from the global strategic petroleum reserve caused physical prices to collapse. Some of that pricing may be due to the lack of available tankers, but considering the fact that if all the tankers are full, that means there’s a lot of supply to come onto the market, which is actually a negative, not a positive, to the price of oil.
Yet Iran continues to talk tough as the Secretary of Iran’s Supreme National Security Council declares: “Attacks on infrastructure will be responded to in kind. Israel will not be spared by the response.” This rhetoric comes against a backdrop of ongoing strikes, counter-strikes, and fragile cease-fire dynamics in the region.
But tough talk from Iran probably will not be met with the military ability to carry out those threats completely, but it still could cause some short-term problems. Iran’s ability to move oil prices is becoming less every day.
Prior to the attacks, oil flows through the Strait of Hormuz had surged back toward pre-conflict levels, with tanker traffic hitting highs not seen since the war began, as U.S.-backed security helps vessels navigate safely. Even Iran’s own exports have dropped sharply in a rush — hitting multi-year lows amid the pressure. Tanker traffic hit highs not seen since the war began—with Bloomberg and Kpler data showing multi-million-barrel days (e.g., ~20 million barrels observed over a weekend in late June, including ~17 million on one day per U.S. Central Command)—as U.S.-backed security helps vessels navigate safely and clears stranded cargoes.
Flows have climbed toward 10+ million bpd at peaks, approaching the pre-war ~20 million bpd norm, while Iran’s exports dropped sharply to multi-year lows around 200-260k bpd in May amid the pressure. This positive momentum is easing market tightness and supporting a more balanced energy outlook, allowing the market to stay relatively calm even after the U.S. hit Iranian targets and President Trump reminded Iran who is in military control.
The has lowered its global oil demand forecast for 2026 for the first time since COVID-19, reflecting high prices, conservation efforts, and the lingering effects of disruptions — which is helping keep inventories in better shape and preventing any runaway price spikes.
We’re also seeing crack spreads stay impressively solid — even after a recent dip — signaling strong refining margins and healthy product demand that continue to support the overall energy complex.
This comes as the Wall Street Journal points out that Ukrainian long-range drones have dramatically expanded their reach, striking Russia’s largest refinery in Omsk, Siberia—nearly 1,500 miles from Ukrainian-controlled territory (well beyond previous ~1,000-mile limits). The attack hit the crude distillation unit, causing fires and significant disruption. Russian authorities had not protected the site, assuming it was out of range.
The strike triggered a ban on diesel exports announced Wednesday and worsened an ongoing month-long fuel shortage. All major refineries in European Russia have already been hit this year, cutting production by at least 25%. This has led to long lines, shortages, rationing, and even Kazakhstan setting up border checkpoints to stop fuel smuggling according to the Journal.
Ukrainian FP-1 drones (max range ~2,100 miles per manufacturer Fire Point) now imperil core Russian oil-and-gas assets in western Siberia, LNG terminals (e.g., Yamal Peninsula), pipelines, pumping stations, and military-industrial sites. Russia’s air defenses are stretched thin across a vast area, creating vulnerabilities.
This is causing the strength in the diesel crack spread as Russia, once a major diesel exporter (production exceeded domestic use by one-third), faces growing diesel shortages alongside gasoline issues. Economists note this strains the budget (subsidies for farmers/airlines could cost billions monthly as export revenues drop). It’s described as a management/governance crisis as much as a physical one, with reserves and “teapot” refineries offering some short-term relief.
Ukrainian officials frame it as leveling the playing field, leveraging geography against a larger foe. Experts (e.g., Oxford Institute for Energy Studies’ James Henderson) see the Omsk hit as potentially “the straw that broke the camel’s back” for Russia’s energy system. Repair times for damaged units are weeks/months, but heavier missiles could cause far worse damage.
Putin downplayed the strikes as mostly psychological, emphasizing Russian energy system resilience. However, the campaign (combined with middle-range strikes in occupied areas/Crimea) is aimed at forcing a ceasefire on current lines by increasing pain on Russia’s economy and military logistics. Trump reportedly endorsed the long-range attacks as potentially helpful for ending the conflict. Analysts hope sustained pressure (fuel shortages affecting military, shipping, food, and agriculture) could eventually push Putin toward negotiations, though he has so far escalated with missile attacks on Ukrainian cities.
As we’ve said since the beginning of this conflict wars are more often selling opportunities for oil than buying opportunities and that’s been proven to be true more often than not after the initial spike having said that we did fill our downside gap that I keep pointing out and that means that we probably have seen the floor for oil but that doesn’t mean that we’re going to be spiking up dramatically obviously we have to keep an eye on gasoline and diesel if the tensions are running high in the short term we can continue to trade the swings but for position traders for oil where I had been recommending the short side I am now favoring the long side especially on breaks.
Oh, —you can be very tricky. Prices looked like they were going to move higher on strong weather-related demand, only to get blindsided by the latest EIA storage report that showed an injection of 61 Bcf for the week ending July 3, 2026. That brought total working gas in underground storage to 2,983 Bcf, about 15 Bcf below year-ago levels but a solid 185 Bcf (6.6%) above the five-year average.
The build was right around or slightly above expectations, reinforcing the comfortable supply picture heading into peak summer cooling demand. While heat has been boosting power burn, the injection underscores resilient production and the market’s ability to absorb demand without tightening inventories dramatically. Prices pulled back on the news, with August futures settling around the $3.00–$3.20 range in recent sessions amid ample supply.
Still, the Fox Weather outlook means heat keeps the bull case alive. Fox Weather and broader forecasts point to continued above-normal temperatures across much of the U.S., particularly in the South, Midwest, and East through mid-to-late July.
This should sustain strong air-conditioning demand and elevate natural gas use for power generation (power burn). Models show some divergence—ECMWF hotter in key hubs versus GFS—but the overall pattern supports cooling degree days (CDDs) well above normal in demand centers.
An intense heatwave has already been noted in the eastern U.S., with highs in the 90s–100s+ in many areas, keeping power generators busy. While later model runs have tempered some enthusiasm for ultra-prolonged extremes, the summer cooling season remains a key supportive factor. NOAA and long-range outlooks favor warmer-than-average conditions across the western third, southern tier, and East Coast, which bode well for gas demand.
Still, on the supply side, U.S. dry gas production remains robust near record levels (~109–110 Bcf/d in recent weeks), though slight dips from maintenance or other factors have been noted. Associated gas from oil plays continues to provide a strong base. Power sector consumption is a major growth area, with LNG exports also supportive, with flows to export plants recently around 17–18 Bcf/d. Overall, summer demand is projected higher year-over-year.
Inventories are building solidly but the surplus to the five-year average is manageable. EIA’s Short-Term Energy Outlook sees end-October storage around 3,966 Bcf (still above average), setting up a balanced winter picture. Henry Hub prices are forecasted to average near $3.67/MMBtu for 2026 overall.
So for now, natural gas remains range-bound in the near term due to the bearish storage print and solid supply, but the Fox Weather heat outlook provides a solid floor and potential for upside if power burn exceeds expectations or if any LNG/export disruptions emerge.
