As Goes Oil. The Energy Report 06/26/2026

“As goes oil, so goes everything else.” As President Trump said while touting a record day for barrels moving through the Strait of Hormuz, 19 million barrels flowed through the waterway, an all-time high. Yet the day was not without hiccups, as the oversold oil market rallied after reports of a tanker being attacked in the Strait and reports that two oil tankers were forced to turn back after Iran warned them they needed clearance to move. Iran is still seeking to charge a toll, a no-go for the U.S., but if it could, it would be very lucrative. Of course, charging a toll in international waters is not legal, but President Trump joked that if Iran did it, he would want in on the action. Still, charging a toll would raise questions about similar charges around the globe, which could hamper global trade and increase the possibility of conflict as others try to assert authority to collect that tax—or, if you will, ransom.
Oil appears to be calming after yesterday’s flare-up in the Strait of Hormuz, where a cargo ship was struck near the Omani coast, prompting a temporary pause in the U.N.-backed evacuation effort. Some operators are pausing out of caution, while others continue to move using safer routes closer to Oman’s shores. Reports suggest Saudi Arabia and other producers are positioning for higher output as they prepare for life after the disruptions, with many countries eyeing long-term alternatives to the Strait.
Of course, I’m hearing from plenty of folks still surprised that oil hasn’t surged—and a bit testy with me for calling the bearish case all along. (Hey, I’m just glad the market’s proving the point without anyone needing a price shock to wake up!) They’re frustrated that global supplies in storage are scraping multi-decade lows and Cushing, Oklahoma, is flirting with tank bottoms—around 20 million barrels or less, near operational minimums after weeks of steady draws.
They say the market is divorced from the real world. Well, as I’ve written before, oil has mostly been selling the events rather than the fundamentals. You have to give credit where it’s due to the Trump Administration for pulling off what the experts called impossible: keeping oil lower during a major crisis. They orchestrated the biggest and most timely release from global strategic reserves in history—including a massive U.S. draw of 172 million barrels—while setting the stage for record U.S. oil and product exports.
That move helped alleviate jet fuel shortages in Europe, let refiners max out capacity without the usual seasonal gas regulations holding them back, and came alongside a smart suspension and extension of the Jones Act to ease domestic shipping flows. The result? Energy dominance has recalibrated away from OPEC reliance and toward the U.S. and our hemisphere. I’ve been saying we’d head lower despite the headlines, and so far, the tape has been a pretty good listener. As I noted yesterday, we’re probably still headed toward an OPEC-style production scramble as everyone races to reclaim share. The UAE has built up production capacity to around 4.8 to 5 million barrels per day, with ambitions for more, but OPEC+ quotas kept it capped closer to 3 to 3.5 million barrels per day.
Iraq also wants to produce more oil and has told OPEC that it wants to be let loose from its quota. Before the Hormuz disruptions, Iraq was producing roughly 4.2 to 4.4 million barrels per day. But with the Strait closure and related logistical problems, output has reportedly been cut sharply, falling closer to 1.4 to 1.5 million barrels per day in recent months. Iraq’s OPEC+ target for July is around 4.35 to 4.4 million barrels per day, but actual production is lagging because of the war and shipping issues. Longer term, Iraq believes it can sustain something closer to 4.5 to 5.5 million barrels per day, with more upside once southern exports normalize. And the country has even bigger ambitions: the Oil Ministry is targeting 6 to 7 million barrels per day by 2028 or 2029 through new upstream projects, mostly in the south, along with major infrastructure improvements.
For oil, though, even ahead of any full Strait reopening, we will still have to rebuild inventories. With the shake-up—the UAE already out of OPEC and Iraq maybe not far behind—we will probably see a massive global rush to produce. OPEC producers will ramp up as fast as they can toward maximum production, and the U.S. will also see output hit fresh record highs. As my new friend Bullwinkle the trucker said with a grin, “If we could only get rid of Governor Gavin Newsom, maybe California could add to that surge!”
So for the trade, we should go down and fill the gap from the first night of the invasion. We will probably build a bit of a base there and start moving into more stable prices. There is going to be a lot of focus on how the Strait continues to flow, and that could impact us going into the weekend.
Natural gas is hot, cold, and keeping us on our toes. Nat gas had a bearish injection, but as traders watch their Fox Weather apps for news of the heat dome, they are keeping their bearish powder dry.
The EIA released its latest Weekly Natural Gas Storage Report on Thursday, June 25, showing a net injection of 76 Bcf for the week ending June 19. This came in a bit above some expectations (around 67 Bcf consensus in some surveys) and compared to a 73 Bcf build the prior week.
Working gas in storage now stands at 2,835 Bcf, which is 49 Bcf below last year at this time but a solid 152 Bcf above the five-year average of 2,683 Bcf. It’s a bearish print on the surface that highlights comfortable supply levels heading into peak summer demand, but the market isn’t panicking thanks to the weather wildcard. The Fox Weather team and broader forecasts are highlighting building heat across much of the central and eastern U.S. A sprawling high-pressure system (classic heat dome setup) is driving above-average temperatures, with potential for records and strong cooling demand that could boost power burns and nat gas usage.
Near-term relief in some areas (like the Northeast after recent scorching) is giving way to renewed warmth and potential expansion of the pattern. Models point to widespread highs in the 80s–100s+ in key demand regions, with heat indices pushing even higher due to humidity. This supports stronger-than-normal cooling demand in the weeks ahead, which could tighten the balance and limit downside even after the injection.
Traders are watching for confirmation of sustained heat building into early July — the kind that turns air conditioners on full blast and pulls nat gas through power plants. Production remains robust, but any stronger demand surge from the dome could flip the script quickly. The fundamentals show ample supply, but the heat dome is the story that could keep prices supported. We’ll monitor next week’s storage print and evolving weather models closely.
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