Dousing War Flames with 400 million Barrels Plus. The Energy Report 03/12/2026

The International Energy Agency (IEA) agreed to release 400 million barrels of oil from member countries’ strategic reserves, and President Trump announced the release of 172 million barrels of oil from the United States’ Strategic Petroleum Reserve after oil prices surged when Iran attacked three cargo ships with projectiles in the Strait of Hormuz and Persian Gulf.

   We are learning that oil jumps on seeing flames in this conflict and footage that showed ships in flames, causing Brent crude oil prices to surge to $101.59 a barrel before pulling back as the additional barrels started to come in.

Yet, it is clear that Iran has only one option left: to try to terrorize the Strait of Hormuz and attempt to control the world’s global oil supply with terror tactics and mines. Additional Iranian drone strikes hit energy infrastructure, such as oil tanks in Oman’s Salalah port and fuel facilities in Bahrain, sparking major blazes. Reports also indicate barrages toward Israel (with claims of targeting airbases and intelligence headquarters), as well as attempted strikes on Saudi Arabia, Qatar, the UAE, and other Gulf states—many of which were intercepted by air defenses.

So will the move by the IEA cool prices as some dubbed the initial price move up after the announcement a failure. The answer is yes unless Iran can continue to shut down the Strait of Hormuz indefinitely . The release is the most massive oil in the agency’s history surpassing the 182 million barrels released following Russia’s invasion of Ukraine in 2022.    And while some say that this war is only a transportation problem, it also means that oil prices will cut back production that might cause a supply problem justifying the oil release.

Major oil producers across the Gulf are experiencing significant output disruptions. Iraq has seen output at its key southern oil fields, including Rumaila and West Qurna, drop by about 70%—down to 1.3 million barrels per day—as storage overflow and lack of export routes force production shutdowns. Kuwait is facing partial shutdowns with expectations of deeper cuts or even a full halt, due to storage bottlenecks and Iranian drone attacks on infrastructure.

Qatar has slashed LNG and oil production, suspending operations at major liquefaction facilities and declaring force majeure on exports, while warning of broader regional halts. The UAE also faces imminent shutdowns and has already reduced refining capacity.

Collectively, these disruptions threaten up to 20 million bpd of regional transit flows, underscoring the vulnerability of Gulf energy exports amid ongoing attacks and logistical constraints.

Energy Secretary Christopher Wright announced that the United States will commence oil releases next week, with completion anticipated in approximately 120 days.   He also says that the U.S. plans to replenish the reserve with 200 million barrels of oil “within the next year.” Mr. Trump  also told reporters that after the reserve is tapped, “we’ll fill it up.”

Although markets fear ongoing instability, if the US, Israel, and global powers prevent Iran from controlling the Strait of Hormuz and eliminate the regime’s threats, ending the conflict could reduce geopolitical risks. This could result in an oversupply of oil and usher in a period of lower energy prices.

 In fact in the EIA Short Term Energy Outlook, they said that Higher oil prices lead to more U.S. crude oil production in their forecast. They expect U.S. crude oil production will average 13.6 million barrels per day (b/d) in 2026 and rise to 13.8 million b/d in 2027. Our 2027 forecast is 0.5 million b/d higher than  EIA last month’s forecast.

In fact,  the Wall Street Journal reported that BlackRock Larry Fink said that the Iran war could result in lower energy prices long term which  I agree with . He Also said that he isn’t worried about inflation, despite pressure from tariffs and oil prices. , Fink said that he thinks technology and AI advancements are set to boost productivity and prove deflationary in the long term, overcoming road bumps like the Iran energy shock. The war could even be a long-term positive, he said. “If there’s a resolution, or some neutralization of Iran and Iran is less of a global threat. And their energy market is now opened up to the world…I believe the big, longer-term possibility is lower energy prices, not higher,” Fink said.

And let’s say the loud part out loud. If it were not for Trump’s energy policies, oil and gasoline prices would be much higher than they are now. And President Trump is not finished even invoke the Defense Production Act to facilitate Sable Offshore Corp.’s restart of offshore oil production in Santa Barbara County, California. This would preempt state regulations and a 2020 federal decree by allowing the company to resume operations from existing platforms that will help ease global crude constraints.

The Trump Policies may also bring back the Keystone Pipeline back to life and this Iran war is a reminder hoe Joe Biden’s energy policies were bad for the country. Joe Biden vindictively killed the pipeline for purely political purposes even as his own department conclude that the pipeline would not have an impact on greenhouse gas emissions, and I could argue would add to them. The Keystone could have helped by moving oil from Canada to the Gulf efficiently helping to ease price spike risk in this time of trial.  The good news is that efforts to revive elements of the canceled Keystone XL pipeline are gaining traction, with South Bow Corp. launching an open season for the proposed Prairie Connector pipeline. This 450,000-barrel-per-day project could increase Canada’s crude exports to the U.S. by about 12%, linking Alberta production to key delivery hubs and requiring approval from the Trump administration.

President Trump is saying the war with Iran is all but won, highlighting the damage inflicted and signaling that a resolution could be around the corner.    Year the market fears the desperation by the Iranian regime and their acts of desperation and the threat to mine the Strait of Hormuz.

 The Wall Street Journal writes that “Sea mines are simple weapons that could give Iran outsize power to wreak havoc with the global economy.  U.S. officials said Wednesday that Iran had laid mines in the Strait of Hormuz, the narrow waterway that carries 20% of the world’s oil exports from the Persian Gulf to the rest of the world. The U.S. Institute for the Study of War estimated that 10 mines had been laid, though President Trump cast doubt on such reports and encouraged shippers to traverse the strait.

“It’s a good tool of asymmetric warfare,” said Jahangir E. Arasli, a senior research fellow at Baku, Azerbaijan-based Institute for Development and Diplomacy who specializes in maritime threats.

“The conventional capability is wiped out, but they have this asymmetrical capability,” he said, noting that he was speaking in his personal capacity.  Iran’s stockpile includes basic ordnance designed to drift or be anchored to the floor of the shallow Persian Gulf.

A U.S. military website describes one class of Iranian mine, the Maham 1, as a circular piece of 1980s-era equipment designed to float in water as shallow as one meter that is equipped with five horns that when struck can detonate up to 120 kilograms—equivalent to 264 pounds—of explosives. The mines are moored on a chain or anchored to the seabed.

Mines have been among the most destructive weapons that the U.S. Navy has faced, maiming more ships than any other means of attack since World War II, according to a U.S. Naval Institute report produced several years ago.

The U.S. military said it has destroyed Iranian naval vessels designed for setting mines. The military earlier said it eliminated an Iranian Kilo-class submarine, which was also thought to have the capability to launch mines. Yet Iran primarily sets mines using frogmen on small boats that resemble ordinary fishing vessels, an informal maritime militia of dinghies that is virtually impossible to identify and eliminate.

While the primary risk remains Iran’s efforts to prolong the conflict, the outlook for oil markets is ultimately positive. In the near term, stabilizing supply routes will be essential, and some volatility is inevitable as geopolitical tensions play out.

However, decisive actions like strategic oil releases and potential boosts in production are poised to ease pressures and pave the way for recovery. With victory the horizon, resolving the conflict holds the promise of ushering in lasting stability and a healthier global energy landscape.

Another thing is Kharg Island which is Iran’s ability to export oil people were shocked that Iranian  barrels were actually hitting the market allowing Iran to still get money while they terrorize the rest of the world The United States is going to have to send a signal to the world that any tanker that it’s moving Iranian oil will be subject to seizure just like they seized oil ships leaving Venezuela.

Kharg {also spelled Khark Island} sounds like the setting for a monster movie but it serves as Iran’s primary crude oil export terminal and is a critical asset for the country’s economy.

The island handles approximately 90% of Iran’s crude oil exports, with a loading capacity of around 7 million barrels per day.

It also has pipelines from various Iranian oil fields converge here, where the oil is stored in large tanks and loaded onto supertankers for international shipment, primarily to markets like China.

The island’s deep-water berths allow it to accommodate very large crude carriers (VLCCs), making it essential for bulk exports, as much of Iran’s coastline is too shallow for such vessels.

Developed in the 1960s by a U.S.-Iranian joint venture, it has been a key hub since then, but its vulnerability has made it a focal point in geopolitical tensions, especially amid ongoing conflicts.

  Not only does the US need to beat Iran militarily but also economically.  Market Watch is reporting that Energy Information Administration weekly petroleum supply and demand data released on Wednesday suggests U.S. fuel retailers may have stocked up on products to try to get ahead of sharp price increases that followed the U.S. and Israeli attacks against Iran.

In the Meantime, US oil supply is ample while demand surges and the EIA is rising us oil production estimates due to higher prices.

 MarketWatch reported that EIA reported solid increases in both implied gasoline and distillate demand in the week ended Friday. The agency said gasoline products supplied to the market, its proxy for demand, rose last week by 949,000 b/d, or more than 11%, to 9.241 million b/d. That was the highest weekly reading since mid-June and the first time since November that demand has surpassed 9 million b/d. It was also above the comparable weeks of 2024 and 2025.

EIA also estimated that distillate products supplied to the market last week rose by 367,000 b/d, or nearly 10%, to 4.065 million b/d, the highest number in three weeks and the seventh-highest reading since mid-August. In addition, it was more than 4% above the year-ago number and 20% higher than in the comparable week of 2024.

The strong demand dropped U.S. gasoline stocks by 3.7 million bbl to 249.5 million bbl, leaving holdings about 5% above the five-year average and up 8.4 million bbl year to year. Supplies fell in all regions except the East Coast (PADD 1). Gulf Coast (PADD 3) inventories fell 2.1 million bbl and Midwest (PADD 2) stocks declined by 1.1 million bbl.

The agency estimated distillate inventories fell by 1.3 million bbl, putting them about 2% below the five-year average, but 1.8 million bbl above where they were in the same week of last year. Much of the drop in distillate holdings came in PADD 3, where EIA had stocks dropping last week by 1.6 million bbl to 46.4 million bbl. Still, distillate stocks in the region are about 8 million bbl above the year-ago level.

U.S. gasoline imports rose last week by 104,000 b/d to 542,000 b/d but were below levels reported for the comparable weeks of 2024 and 2025. Most of the increase came on the West Coast (PADD 5), where gasoline imports jumped to an average of averaged 189,000 b/d from 22,000 b/d in the previous week.

The agency estimated U.S. gasoline exports fell last week by 187,000 b/d to 880,000 b/d. Distillate exports rose by 23,000 b/d to 1.251 million b/d. Over the last four weeks, exports have averaged 1.174 million b/d, more than 21% above the same period of 2025.  U.S. refinery activity continued to ramp up during the week, with gross inputs increasing by 287,000 b/d last week to 16.37 million b/d, up about 3% year to year. U.S. refineries ran at 90.8% of capacity, up from 89.2% in the previous week. With inputs at their highest level since January, it’s a further indication that seasonal maintenance activities are winding down.

Refinery gasoline production averaged 9.624 million b/d, up 500,000 b/d from the previous week and nearly 400,000 b/d higher than a year earlier.

Distillate production also rose, climbing by 132,000 b/d to 4.944 million b/d, according to EIA. With distillate demand strong and refining margins high, refiners during the week produced about 11% more distillate than they did at the same time last year.

Despite the increase in refinery activity, U.S. crude inventories excluding the Strategic Petroleum Reserve, rose last week by 3.8 million bbl to 443.1 million bbl. With the war in Iran raising concerns over oil supply, U.S. inventories ended last week about 2% below the five-year average and about 7.9 million bbl above the where they were a year ago. EIA also estimated U.S. crude production remained strong last week at an average of 13.678 million b/d, down 18,000 b/d from the previous week, but 103,000 b/d higher than year-ago output. Commercial crude imports rose by 98,000 b/d from the previous week to 6.422 million b/d, with imports into the Midwest increasing by 102,000 b/d. Crude exports fell by 563,000 b/d to 3.434 million b/d, EIA said.

Nat gas is back up as Fox Weather is breaking my heart telling me that winder might not be over!  Back-to-back winter storm systems to impact millions, unleash blizzard conditions and feet of snow. Fox Weather says that after a brief warm spell, winter weather is expected to make a comeback as back-to-back storm systems are set to move across the Northern Tier of the U.S. later this week. NOOOOOO!!! But not only weather,  natural gas is closely tracking oil its Hydrocarbon distant cousin that the Energy Information Administration (EIA) minds us is a domestic market.

According to the EIA’s Short-Term Energy Outlook, there have been fewer shipments of liquefied natural gas (LNG) passing through the Strait of Hormuz, which has caused natural gas prices to go up in Europe and Asia. However, the EIA expects that this situation won’t really affect natural gas prices in the United States.

The EIA predicts that the Henry Hub spot price for natural gas in the U.S. will average about $3.80 per million British thermal units (MMBtu) in 2026, which is 13% lower than what they estimated last month.

These lower prices are mainly because February was warmer than expected, so more natural gas stayed in storage. For 2027, the EIA thinks prices will average nearly $3.90/MMBtu, which is 12% lower than last month’s forecast. The main reason for the lower prices in 2027 is that oil prices recently went up, leading to more oil production and, as a result, more natural gas being produced alongside it.

Still, you should download the Fox Weather Ap to look for any signs of spring. Also stay tuned to the Fox Business Network. Also call me if you need help at 888-264-5665 or email me at pflynn@pricegroup.com.

 

Thanks,

Phil Flynn

Senior Market Analyst & Author of The Energy Report

Contributor to FOX Business Network

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