Nowhere to Run, Nowhere to Hide. The Energy Report 05/15/2026

Oil prices are getting a bid going into the weekend as President Trump and President Xi agreed that Iran can’t get a nuclear weapon, yet the real market concern is the perceived disconnect from the back end of the futures curve, along with worries that the global oil supply safety net is quickly disappearing.

The Wall Street Journal raises the issue that is burning up oil trading circles as many are astonished the market is not as scared as they should be about what they say is a major oil crisis.

Georgi Kantchev writes that global oil inventories have declined at a record pace since the closure of the Persian Gulf 2½ months ago, rapidly depleting the surplus that initially cushioned energy markets from the disruption caused by the Iran conflict.

He sites that international Energy Agency (IEA), that says global oil inventories—including onshore storage and floating tankers—fell by 250 million barrels during March and April, equivalent to roughly 2½ days of global oil consumption. This drawdown they say encompasses both private commercial stocks and releases from government strategic reserves.

The article highlights that an underappreciated pre-conflict surplus, including Iranian and Russian oil at sea and U.S. Treasury waivers on Russian sanctions, provided an initial buffer. Western governments, through the IEA’s 32 member nations, have released approximately 164 million barrels through May 8, with plans for an additional 210 million barrels by the end of July, helping offset the loss of about 10 million barrels per day from the Gulf.

However, analysts warn this relief is temporary. JPMorgan Chase, in its report, “The Illusion of Plenty,” projects that stockpiles in wealthy nations could reach “operational stress levels” as early as early next month and “operational floor levels” by September if the Strait of Hormuz remains closed. The bank anticipates demand destruction would likely occur before inventories hit critical lows.

Ellen Wald, Senior Fellow at the Atlantic Council’s Global Energy Center, noted: “You can only decrease consumption so much, and when inventories run out, they are going to run out. At some point the market is going to collide and prices are going to shoot up.”

Saudi Aramco CEO warned that global stockpiles of refined products such as gasoline and jet fuel could reach “critically low levels” ahead of the summer driving and travel season. U.S. diesel stocks are projected to fall below 100 million barrels by end-May—the lowest since 2003—while parts of Asia are approaching critical scarcity in naphtha, fuel oil, and diesel, prompting fuel-saving measures and export restrictions in countries such as India, Thailand, and Taiwan.

Demand destruction is helping balance the market in the short term, with the IEA forecasting a contraction in global oil demand this year, particularly in Q2. However, sustained high prices risk broader economic impacts. The physical premium for immediate barrels over futures has narrowed significantly (from as high as $35/bbl to around $3/bbl), signaling a shift from panic to managed scarcity.

Hamad Hussain of Capital Economics expects that continued inventory drawdowns could push oil prices to $130–$140 per barrel next month if the strait stays closed. As of Thursday, Brent crude was trading around $105 per barrel.

Even if a U.S.-Iran deal reopens the Strait of Hormuz quickly, analysts including Tamas Varga of PVM Oil Associates note that full supply recovery would take at least two to three months due to logistical and infrastructure challenges.

So the point is clear that the world has consumed its oil safety net at a historic rate. While strategic releases and demand reduction have prevented immediate chaos, the margin for error is shrinking rapidly. A prolonged closure of the Strait of Hormuz points toward tighter physical markets, potential refined product shortages, and upward pressure on prices in the coming weeks and months.

The WSJ piece paints a dire picture of a rapidly vanishing oil safety net, warning of acute shortages, critically low inventories, and sharp price spikes (potentially $130–$140+/bbl) if the Strait of Hormuz stays closed.

Yet  on the flipside perhaps the oil curve is suggesting that demand destruction, strategic releases, and non-Gulf supply responses are proving more effective and elastic than the bullish narrative suggests, delaying or muting the “harsh reckoning.”   Also there are more signs that Iran’s Strait of Hormuz folly may, overtime. make the world’s most important chokepoint not so important.   Today, Javier Blas reported that The UAE discloses it’s building an additional second pipeline bypassing the Strait of Hormuz.  The new pipeline will be finished in 2027 and will double the country’s export capacity in Fujairah (the current pipeline has a capacity of 1.5-1.8m b/d)

So you could say that while the safety net is thinning fast, but it has not yet disappeared, and self-correcting mechanisms as demand destruction and alternative supply is working and perhaps the market is suggesting that Iran can’t keep the Strait of Hormuz closed much longer, cannot charge a toll, something both President Trump and China President Zi agree could lead to reopening that strait where even partial Hormuz reopening could unwind much of the tightness within months.

This comes as Fox News reported that a Navy ship seized off the coast of the UAE near the Strait of Hormuz may have been a “floating armory.” The vessel was roughly 38 nautical miles from the UAE’s Fujairah oil export terminal when it was boarded by unknown personnel. Fox News even raises questions about Iran’s ability to allow certain ships through the strait while restricting others.

Natural gas prices are showing some resilience this week, clawing background as traders digest the latest fundamentals and turn their attention to the summer demand outlook. After a period of consolidation, the market appears to be testing whether summer weather risks have been fully priced in, especially with growing chatter about a potential Super El Niño on the horizon.

Yesterday’s EIA storage report delivered a bullish surprise, with working gas in storage rising by 85 Bcf for the week ending May 8 — landing at the higher end of expectations but still supportive in the context of recent demand trends and below-average injections earlier in the shoulder season. Stocks now sit at 2,290 Bcf, roughly 140 Bcf above the five-year average and 51 Bcf higher than last year at this time. While builds are normal for this time of year, the market liked the tighter-than-feared balance heading into peak summer cooling demand.

This bullish EIA print, combined with shifting weather forecasts, helped spark a bit of a rally in natural gas futures. Prices have recovered some recent losses and are trading with a firmer tone as participants eye stronger cooling demand ahead.

Is natural gas finally pricing in summer weather? With all the talk of a common (or even “Super”) El Niño, natural gas is getting a bit of a rally on the Fox Weather outlook as well as yesterday’s bullish EIA storage report. A developing El Niño pattern is raising the odds for hotter and more humid conditions across much of the U.S. this summer, which could drive up power generation needs for air conditioning and tighten the supply/demand balance.

Forward curves are firming on these prospects, with LNG demand also providing longer-term tailwinds. Early signs of heat building in key regions could limit further storage injections and set the stage for stronger withdrawals once summer truly kicks in. Production remains relatively flat, and any uptick in cooling degree days (CDDs) could quickly shift the narrative from oversupply concerns to demand-driven support.

Fox Weather Outlook: Forecasters are closely monitoring the transition toward El Niño conditions, which could bring above-average temperatures and increased storm activity to large parts of the country. This setup favors higher electricity demand for cooling, particularly in the South and Midwest, potentially boosting nat gas consumption for power generation. While shoulder-season volatility remains, the broader summer picture looks increasingly constructive for prices if the heat materializes as modeled.

Overall, the combination of a supportive storage report and warming weather signals is giving nat gas a much-needed lift. Traders will now watch for confirmation of hotter forecasts and any shifts in production or LNG flows. Stay tuned — summer could still have plenty of upside surprises in store. So Make sure you download the Fox Weather ap to keep up with the latest weather shifts and get prepared for the coming Super El Niño on the horizon. Also stay tuned to the Fox Business Network ! Invested in you! Have an awesome weekend! Make sure you call today to get signed up at 888-264-5665 or email me at pflynn@pricegroup.com.