Final Stages. The Energy Report 05/21/2026

Yet today, oil prices and diesel reversed course after reports that Iran’s Supreme Leader, Mojtaba Khamenei, from somewhere in a bunker, allegedly said that “Uranium must stay in Iran,” according to two senior Iranian sources. Maybe the Ayatollah is not getting the news in his dark hole, but he should know that this will be unacceptable to President Trump. If he fails to move on that point, the bombing will begin again.

This comes as Iran is flexing its muscles, promising not to bomb ships if they submit to their newly formed “Persian Gulf Strait Authority.” Iran says you can pass if you bend down and kiss their ring, pay a toll, or let them coordinate the passage. If not, they will bomb you. Iran wants to make you an offer you can’t refuse by holding an international waterway hostage. They also want a nuclear weapon so that others will have to bend to their will, allowing them to achieve their goals of wiping Israel off the map and bringing “Death to America.”

Yet is the grand poohbah Supreme Leader really in control? Bloomberg reported that Iran said the latest proposal from the US has partly bridged the gap between the warring sides, as they seek to turn a fragile ceasefire into a peace deal. The Iranian foreign ministry reiterated that it wants a commitment that fighting will end “on all fronts, including Lebanon,” and called for the unfreezing of sanctioned assets. US President Donald Trump warned that he may resume attacks in the coming days if Iran didn’t agree to his terms, saying, “we’ll either have a deal or we’re going to do some things that are a little bit nasty.”

Of course, oil traders are worried that it could get nasty for crude suppliers even as we saw record draws of petroleum supplies that are still not that far below normal.

The latest EIA Weekly Petroleum Status Report (released May 20, 2026, for the week ending May 15) showed a much larger-than-expected commercial crude inventory draw of 7.863 million barrels (vs. analyst expectations of around 2.5–2.9 million barrels). This brought U.S. commercial crude stocks down to roughly 445 million barrels, shifting deeper into a deficit of about 10.3 million barrels below the five-year average (up from a ~1.2 million barrel deficit the prior week). It sounds ominous, yet as crazy as this sounds, supply is really about 2% below the five-year average for this time of year.

Cushing stocks also fell by another 1.6 million barrels. Gasoline inventories dropped ~1.5 million barrels (less than some forecasts), while distillates saw a small build. Refineries ran at a strong 91.6% utilization, processing ~16.3 million bpd, with solid exports supporting the draws. Total motor gasoline inventories decreased by 1.5 million barrels from last week and are 5% below the five-year average.

Adding to the tightness, the Strategic Petroleum Reserve (SPR) saw a near-record draw of 9.9 million barrels (one of the largest weekly releases on record), contributing to an overall commercial + SPR inventory drop that analysts described as the biggest weekly decline in history amid ongoing global disruptions.

Yet U.S. commercial crude oil stocks (the regular oil that companies hold in tanks, not the government’s emergency reserve) are still pretty close to what’s normal for this time of year. However, when you compare them to the average of the last five years, they’re now clearly below normal — we’re in a noticeable shortage compared to recent history.

This is happening because refineries are running hard and using up a lot of oil. The U.S. is exporting a lot of oil. The world needs extra barrels to make up for supply problems elsewhere, especially disruptions in the Middle East around the Strait of Hormuz. On the product side (gasoline, diesel, jet fuel, etc.), overall supplies of these finished fuels are now 31 million barrels below the five-year average — a fairly big deficit. Demand over the last four weeks has been solid, and gasoline demand has even ticked up a bit lately. So even though the raw numbers don’t look scary on the surface, the real concern is that the oil market is tighter than it has been in recent years because we’re burning through supplies faster than usual to meet strong demand and cover global shortfalls. That’s why traders are still nervous.

Yet we saw in the futures how quickly prices could reverse if we get to the end of this war, either with a peace deal or by finishing the job and putting the Iranian terror regime on the dustheap of history.

The natural gas rally fizzled a bit overnight and into early trade as traders squared positions ahead of today’s EIA Weekly Storage Report (expected ~10:30 AM ET). Markets had been building momentum on heat-driven demand expectations, but profit-taking and a slightly milder weather outlook for the immediate holiday weekend took some steam out of the prompt-month contract. June NYMEX natural gas hovered near $3.00–$3.08/MMBtu after recent gains to seven-week highs, with the market still showing underlying bullish technical structure.

Analysts expect today’s EIA report (for the week ending May 15) to show a build of around 90–96 Bcf, close to or slightly above the 5-year average for this time of year. Last week’s injection came in at +85 Bcf (to 2,290 Bcf total working gas), leaving inventories ~51 Bcf above year-ago and 140 Bcf (6.5%) above the 5-year average of 2,150 Bcf.

Stocks remain comfortably in the historical range heading into the heart of injection season, but the focus is shifting toward whether early heat can slow builds or force early draws. The May EIA Short-Term Energy Outlook (STEO) continues to paint a picture of ample near-term supply but tightening fundamentals later in 2026–2027 as LNG exports and power demand ramp up. EIA lowered its 2026 Henry Hub spot price forecast modestly to ~$3.50/MMBtu (down ~4.4% from prior) and cut 2027 by ~11.5%, while raising production and consumption outlooks slightly.

U.S. dry gas production has been resilient but softened modestly in the shoulder season (down ~0.2% m/m but still +3.3% y/y through mid-May). Some operators have curtailed output amid low spot prices, and maintenance has trimmed flows.)

Fox Weather and other forecasters highlight a major warmup and potential heat wave gripping the eastern half of the U.S. Summer-like heat is building across the I-95 corridor, Mid-Atlantic, and East Coast, with highs in the 80s–90s (and triple digits possible farther south/Texas). This could drive a spike in cooling demand and power burns right as we transition out of shoulder season.

Early heat like this boosts cooling degree days (CDDs) and can curb storage injections if it persists. However, milder forecasts for the Memorial Day weekend and immediate post-holiday period have capped upside for now. Broader seasonal outlooks favor above-normal temperatures in many regions, supporting stronger summer power demand from gas-fired generation.

LNG feedgas demand has eased from April records due to seasonal maintenance (Freeport, Golden Pass, etc.), but exports remain a structural tailwind. Mexican pipeline flows are steady, and overall fundamentals are transitioning from soft shoulder-season injections toward summer risk.

The rally paused in anticipation of the storage print, but the bigger picture remains constructive: heat-driven cash market strength (national average cash above $2/MMBtu), softer production, and positioning for summer cooling. June futures have reclaimed the $3.00 psychological level for the first time since late March. Watch for any surprise in today’s build number or fresh weather updates—duration of the heat will be key.

Bottom Line is near-term volatility around the EIA number and holiday weather is expected, but the combination of building heat, LNG growth, and power-sector demand sets the stage for potential upside as we move deeper into summer. Stay tuned to Fox Weather for the latest heat updates and Fox Business for market color. Fundamentals remain supported longer-term despite the well-supplied storage picture.

Before you head out on your Memorial Day weekend, take at least a moment to say a pray for the Americans that gave all so we can be free. God bless them all and their families we will never forget their sacrifices. God Bless America

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