Can We Talk. The Energy Report 07/01/2026

Once again the focus seems to be on the talk between Iran and the US which may or may not be face to face but there’s also rumors of some Iranian Revolutionary Guard generals getting murdered, which is kind of an interesting development — most notably, reports that the IRGC’s naval commander overseeing the Strait of Hormuz died in what Tehran is calling a ‘car crash,’ though speculation is swirling that it was actually a targeted hit (widely suspected to be Mossad) aimed at decapitating Iran’s Gulf command structure. If that’s what actually happened, it raises the stakes on the Doha talks considerably. Crude is selling off on a wave of optimism this morning as markets respond to the possibility of a diplomatic breakthrough with Iran and perhaps an end to those that seem to want to derail US Iran peace talks.
The latest Wall Street Journal reporting points to President Trump’s preference for negotiations over a return to full-scale military action, while still keeping every option available. Yet you have to admire Trump’s and his administration’s ability to influence prices, as oil prices are down close to 27% over the past month and about 30% across the second quarter, the steepest quarterly decline since 2020.
While we had the dust-up over the weekend, traffic through the Strait of Hormuz is still accelerating, helping release oil that had been trapped in the Persian Gulf as peace talks advance. Even Iran has bragged that it has already shipped more than 40 million barrels since the U.S. lifted its naval blockade.
Yet this does not mean the war is over yet. According to the WSJ, Trump has held recent discussions with Defense Secretary Pete Hegseth and Joint Chiefs Chairman Gen. Dan Caine about additional strikes — described by some as “finishing the job” — but has decided to stick with talks for now. He believes renewed large-scale attacks could derail diplomacy and delay the ultimate goal of dismantling Iran’s nuclear program. Trump has also signaled he’s comfortable letting negotiations extend beyond the Aug. 18 nuclear deal deadline. The key sticking points  according to the Journal  remain Iran’s demands for billions in “service fees” for Strait of Hormuz transits (which the U.S. insists should be free, as before the conflict) and Tehran’s resistance to severe restrictions on its nuclear activities.
Energy Secretary Chris Wright noted on Fox News that Iran has not been cooperative, but U.S. military escorts have kept global oil supplies rebounding. “With or without Iran, we will ensure energy flows through the Strait of Hormuz,” Wright said. A new U.S.-Iran crisis communication line between the IRGC and CENTCOM is also in early use as a de-escalation measure. Trump publicly maintains that Iran is “agreeing to everything” or faces consequences, while VP Vance emphasized working the diplomatic angle with strong military fallback options. The market is betting on the dovish lean for now, pushing prices back toward levels seen before the conflict intensified.
Of course, many argue that the market was already well-supplied heading into the conflict, with oil stored in ships at record highs, including sanctioned Russian and Iranian cargoes. Brent crude has dropped nearly 13% from mid-week highs and is trading around $72–73 per barrel, its lowest level since February 27 — essentially back to pre-war territory.
Sure it is worth noting, actual barrels are still catching up with the price action and many continue to believe the market still has it wrong. They warn that while oil is moving out faster than they expected crude loadings in the Gulf remain low.
Yet we are seeing Iranian exports ramping up and while  some damaged fields and refineries will take time to restart there is a lot of incentive to make that move quickly.
Yes, depleted inventories also need rebuilding. Yet after the war, I see a global production surge as all oil producers ramp up to regain or maintain their oil market share.
The bottom line is that this is a constructive development for energy consumers and the broader economy. Lower prices reflect reduced geopolitical risk and improving supply prospects — a welcome reset after the recent volatility. We’ll continue to watch how quickly flows normalize and how the 60-day talks progress. In the meantime, the market is breathing easier.
The API report showed a mixed bag this week, with a big draw on crude but a surprise rebound in distillates. While crude posted a solid draw of -6.072 million barrels (well ahead of the -4.1M forecast), the big build in distillates (+2.9M barrels) stole some of the spotlight and helped offset the headline bullishness.
This distillate increase (which includes diesel) comes after a long period of very tight supplies. Even with this week’s build, U.S. distillate inventories remain well below seasonal norms — a reminder of ongoing structural tightness driven by strong export demand, refinery constraints, and steady domestic consumption in trucking, agriculture, and heating. Diesel hasn’t had an easy summer, and this modest refill doesn’t erase the concerns. As I have noted, keep an eye on the diesel crack spread that is on fire as it worries about tight supply and a potential diesel export ban from Russia. While not yet finalized, the response to fuel shortages driven by intensified Ukrainian drone strikes on refineries is making that a real possibility.
Deputy PM Alexander Novak said the domestic market situation was “challenging but under control,” noting that refineries have maxed out capacity, shortened repair timelines, and postponed maintenance to keep up with demand.
Yet currently, only diesel-producing companies are allowed to export it — non-producers are already barred; a total ban would close that remaining loophole.
This marks a reversal from Novak’s stance earlier in June, when he said a blanket ban wasn’t needed yet. A full ban would be one of the most significant interventions in Russia’s fuel market since the war began, with implications for diesel supplies across Europe, Africa, and parts of Asia that still rely on Russian fuel through indirect trade channels — on top of already-strained global fuel supplies from the Iran conflict.
Gasoline also drew sharply (-2.106M barrels), flipping from last week’s build and underscoring healthy driving-season demand. Cushing saw a small build (+0.503M), but the big crude draw keeps the overall inventory narrative supportive on the raw barrel side. It also shows strong demand as Americans celebrate 250 years of this great country.
And while President Trump has been complaining that gas prices are not falling fast enough, they’ve fallen at a pretty good clip over the last few weeks — faster, in fact, than the decline seen after the Russia-Ukraine war first sent prices spiking. Part of the issue now is refinery capacity and record imports straining the system. Today AAA says gas prices were essentially steady, with regular holding at $3.847 (flat from yesterday’s $3.847, though down from $3.928 a week ago and a sharp drop from $4.322 a month ago). Mid-grade ($4.361), premium ($4.738), and E85 ($2.963) all ticked up slightly from yesterday, while diesel actually eased a bit to $4.843 from $4.853. The bigger story is the month-over-month move: every grade is down roughly 10-11% from a month ago, and compared to a year ago, regular is still running about 21% higher ($3.847 vs. $3.179), showing just how much of the Iran-war price spike has yet to fully unwind even as the recent slide accelerates. That is normal after a historic disruption. Mr. President, go easy on the gas Mom-and-Pops; they will get those prices down as fast as they can.
Nat gas prices, while up yesterday, seemed to be adjusting to sweltering and record-breaking heat indexes in some cases. Fox Weather is saying the heat will build across the eastern half of the U.S. this week, with an impressive heat wave gripping major cities like Chicago and Washington D.C. — highs in the 90s to low 100s that could potentially shatter numerous high-temperature records. Natural gas futures had actually traded lower Monday even as Fox Weather warned of dangerously hot conditions ahead — an odd disconnect. Fox Weather’s outlook still calls for a strengthening ridge bringing hotter-than-normal temperatures across the southern and central U.S. through early July, with highs in the 90s to low 100s from Texas through the Southwest and heat/humidity building into the Midwest and East Coast — a classic setup that should keep gas-fired power burn strong and air conditioners working overtime, with cooling degree day forecasts turning more bullish over the next 10-14 days. On the supply side, U.S. dry gas production remains robust near record levels, and last week’s EIA storage report showed a net injection of 76 Bcf for the week ending June 19 — a build traders are calling “bearish,” yet they’re keeping their bearish powder dry given the weather risk on the horizon. The fundamentals show ample supply, but the heat dome is the story that could keep prices supported into the holiday week, and traders will be watching the next storage print and evolving weather models closely for confirmation that this heat sticks.
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