About The Author

Phil Flynn

Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665

Visit Website →

The Coming Oil Glut. The Energy Report 08/21/2026

By On August 21, 2026 - 9:20 AM · In Market Commentaries, Phil Flynn Energy Report
While oil prices are on the verge of posting a two-week gain, as we look ahead oil traders might start to worry about a coming oil glut that the back end of the oil curve is starting to price in.
While diesel crack spread has been the focus driving up oil along with it, what we know is that oil is not the problem, it is refining and transportation.
And this week it was confirmed that we were getting more oil out of the Strait of Hormuz that people knew and its why the predictions of $100 dollar plus a barrel of oil have not come true.
 The Strait of Hormuz remains a constrained chokepoint after the Iran conflict, but the market has already built meaningful workarounds that kept prices from going to the moon. Short-term, Gulf producers are moving millions of barrels around the waterway. Saudi Arabia is pumping heavily through its East-West Pipeline (Petroline) to the Red Sea port of Yanbu—capacity in the 5–7 million bpd range and still being expanded. The UAE is using the existing Habshan-Fujairah (ADCOP) line, which bypasses Hormuz entirely and currently handles about 1.5–1.8 million bpd. On top of that, a “shadow highway” of shuttle tankers, ship-to-ship transfers, and dark vessels (AIS transponders off) is moving more than 4 million bpd out of the Gulf to waiting VLCCs off Oman. These tactical moves, plus clearing of trapped ships, have kept more barrels flowing than many feared.
Longer term, the region is treating Hormuz as a risk that must be permanently reduced. The UAE is accelerating a second pipeline to Fujairah that should double its bypass capacity to roughly 3.6 million bpd by 2027—enough to move nearly all of its crude outside the strait. Saudi Arabia is expanding the East-West system by another 1–2 million bpd. Iraq is moving on reviving the Haditha-Baniyas corridor toward Syria and the Mediterranean (with U.S. involvement) and accelerating a line to Jordan’s Aqaba port. Incremental expansions of existing national systems could push combined bypass capacity toward 12–13 million bpd in a few years—still short of the old 20 million bpd Hormuz throughput, but a big improvement from the current 8–8.5 million. These projects will not eliminate risk, but they will make the strait far less of a single point of failure.
At the same time, U.S. oil production is delivering another surge. Weekly EIA estimates have U.S. crude output running around 13.8 million bpd (13.809 million for the week ended August 14), after hitting a monthly record of 13.934 million bpd in April. The Permian continues to lead, helped by longer laterals, productivity gains, and the price spike that followed the Hormuz disruption. EIA’s latest outlook has 2026 averaging about 13.8 million bpd and 2027 climbing toward 14.2 million. American shale is once again the swing producer that actually shows up when the world needs barrels.
Venezuela is also trying to add supply after years of socialist-era collapse. Output has recovered from under 1 million bpd late last year to roughly 1.2 million bpd (with a year-end target of 1.4 million and longer-term talk of 3 million). Reforms, U.S. licenses, and private investment are helping. But the surge is being slowed by exactly what you’d expect after decades of underinvestment: dilapidated ports and terminals. Tankers are waiting as long as 30 days to load. The June 24 twin earthquakes (7.2 and 7.5) that devastated the coastal area around La Guaira and killed well over 1,400 people added power outages and delays at key terminals, even though the main oil fields themselves were largely spared. Socialism plus natural disaster is a tough combination for infrastructure that was already falling apart.
Meanwhile the UAE has used the crisis to its advantage. After Iranian attacks and years of frustration with OPEC quotas that did not match its growing capacity, Abu Dhabi broke with the old alignment, left OPEC (effective May 1 after 59 years), and is now producing unconstrained. June output jumped to 3.8–4.1 million bpd—near or at record levels—and exports rebounded sharply, hitting records around 3.7 million bpd of crude and condensate by using the Fujairah pipeline, storage, and the same shuttle/dark-shipping tactics. They are on track for more than 5 million bpd of total liquids next year. The UAE has done an impressive job lifting barrels while others were still constrained.
 Hormuz is still a problem, but it is no longer the only story. Pipelines, shuttles, U.S. shale, a recovering (if bottlenecked) Venezuela, and an unconstrained UAE are all adding barrels. The market is more resilient than the doomsayers claimed.
 Now Reuters is reporting that Iraq has sent a delegation to Saudi Arabia seeking a higher output quota from OPEC as the country plans to raise its ​oil production to between 8 million and 10 million barrels per day in ‌the next six years, its prime minister said on Friday.
Also Reuters is report that Venezuela’s crumbling port terminals are putting a hard cap on how fast they can actually get barrels out the door, even as production starts to recover under the U.S.-backed deal.
 Reuters says that tankers are stacking up and waiting as long as 30 days to load because of aging docks, power outages, and quality problems. That’s the kind of delay we last saw during the U.S. naval blockade late last year that ended with the January 3 capture of Nicolas Maduro.
 They say that Interim leader Delcy Rodriguez has been following Washington’s plan to revive exports. But PDVSA and its partners still can’t push past 1.25 million barrels a day, even with rising output, tanks being drained, and strong global demand. They point out that twenty-plus years ago, when Venezuela was pumping more than 3 million barrels a day, those same terminals were moving over 2.5 million barrels of exports and ships were in and out in less than a week.  They say that capacity is long gone.
Yet on the flip side of that keep in mind that many of the experts who didn’t want to go back to Venezuela when President Trump first announced his plans are kicking themselves because they missed a great opportunity over time these hiccups are going to work out in Venezuela could have a very bright future as well as the hemisphere of course we still have to make sure that the government of Venezuela does not slip back into its old ways
.
 Reuters says that Venezuela’s oil export agreement with the U.S., extended several times, has allowed traders including Vitol and Trafigura to ship ​over 140 million barrels of crude and fuel this year, with most cargoes bound to the U.S. and others re-entering markets that had not seen Venezuelan barrels for years, such as Europe and India, as U.S. sanctions are eased.  Reuters though warns that  as Washington pushes ‌a $100 billion energy ⁠reconstruction plan in Venezuela that is mainly focused on boosting crude output, midstream and downstream projects – including
The state company is requiring new customers to pay for cargoes at delivery without any form of credit, which complicates invoicing if those ​customers claim surcharges or quality-related price discounts, the sources added. The migration of dozens of oil contracts to new terms approved in a sweeping energy reform that took effect in late July is expected to exacerbate the fight for infrastructure. But PDVSA has made clear, the sources said, that it will ​keep control of its terminals.
And while Iran claims to have control of the Strait of Hormuz the only thing they have control of is to cause havoc this week President Trump made a clear when it comes to Iran that there’s no talks underway he says that the naval blockade is going to stay in place in the United states has complete control of the Strait of Hormuz He pointed out that plenty of oil is still moving despite the occasional drone attack and that American producers in Texas and Louisiana have stepped up as alternative as president trump correctly says one of the reasons Trudeau never went to $300 or $350.00 a barrel is because the United States is producing a record amount or as the president says we have a lot coming in.
 As we move past recent conflicts, global oil production is poised for a historic surge. Iran’s economic struggles mean OPEC and non-OPEC producers will have to crank up output just to hold their market share. That’s good news for supply.
 Even better news? The United States is already leading the charge. U.S. refiners are running at a blistering 97% of capacity. That’s not just a number — that’s American workers and American facilities meeting demand head-on. Any tightness in product markets should ease as we head into shoulder season.
Yes, retail gasoline is still too high. The AAA national average sits at $4.10.9— the highest for this date in August. California is paying $5.58. Indiana and Texas are in the mid-$3.50s to mid-$3.60s, almost a dollar above last year. That’s painful at the pump. But help is coming.
The latest EIA report showed commercial crude inventories rising 4.4 million barrels to 428.8 million, right in line with the five-year average. Refinery utilization hit 97.2%. Gasoline stocks ticked higher even as they remain 5% below normal. Distillate inventories dropped, keeping diesel tight heading into harvest. That’s the real pressure point.
The administration is acting. The EPA just issued an emergency waiver ending summer-blend gasoline requirements two weeks early — more supply for retailers and drivers. Combined with earlier calls for the Justice Department to look at whether companies delayed passing lower crude costs through to consumers. Save the money, they are.
Happy Friday, folks. After a choppy Thursday, natural gas is bouncing back this morning and that’s a pretty good way to start the weekend.
The EIA dropped a 16 Bcf injection for the week ending August 14. Storage now sits at 3,169 Bcf — 28 Bcf below last year but still 185 Bcf (about 6.2%) above the five-year average. The market treated it as a bit of a bearish print because a lot of folks were looking for an even smaller build. South Central actually withdrew 13 Bcf (salt caverns down 18 Bcf), which tells you the heat was already chewing through supply down there.
Then you look at the Fox Weather map. That ridge isn’t going anywhere. Extreme heat is locked in across Texas, the Southern Plains, and the Lower Mississippi Valley through next week. Triple-digit highs, heat indices pushing 105–110, and ERCOT staring at possible record power demand. Air conditioners stay on, gas-fired generation stays busy, and that demand is what is putting a floor under prices this morning.
September natural gas is trading around $2.77–$2.79, up from Thursday’s $2.733 settle. The smallest weekly build of the injection season so far plus this kind of heat is enough to keep the bulls from giving up.
Production is still running at record levels, but weather is the story right now. As long as that Fox Weather map stays red, the market has a reason to stay constructive heading into the weekend.
Have a great Friday. Stay cool if you can. Call Phil Flynn 888-264-5665. You can download the Fox Weather app and stay tuned to the Fox Business

Thanks,

Phil Flynn

Senior Market Analyst & Author of The Energy Report

Contributor to FOX Business Network

2918 S. Wentworth Ave. FL 1, Chicago, Illinois 60616

312 264 4364 (Direct)  |  888 264 5665 (Direct)  |  800 769 7021 (Main)  |  312 264 4303 (Fax)

www.pricegroup.com

Please do not leave any instructions for orders in your message, as we cannot execute instructions left through email or voicemail. Orders must be entered via direct verbal communication with a representative of our firm. We cannot be held responsible for orders left in any other manner.  PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Investing in futures can involve substantial risk & is not for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses. Member NIBA, NFA.

Questions? Ask Phil Flynn today at 312-264-4364        
Tagged with: • • • •