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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

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Trying To Get the Feeling. The Energy Report 08/12/2026

By On August 12, 2026 - 9:17 AM · In Market Commentaries, Phil Flynn Energy Report
Its been up, down. Oil is trying to get that bullish feeling again, with charts looking short term bullish, but the scale of the crude inventory build is outweighing concerns about tighter supply and is not fitting the larger doom and gloom narrative from the Energy Information Administration or the International Energy Agency and other bullish oil traders.
The API report dealt a serious blow to the “running out of oil” narrative, showing a surprise 9.07-million-barrel increase in crude inventories for the week ending Aug. 7. Analysts had expected a draw of about 0.5 million barrels. Cushing stocks rose 1.57 million barrels, while gasoline inventories fell 1.53 million and distillates dropped about 0.6 million. Another 6.1 million barrels came out of the SPR, bringing the reserve down to roughly 298.7 million barrels—its lowest level since 1983.
EIA and IEA both flag ongoing deficits and inventory draws from Strait of Hormuz disruptions and related shut-ins, while OPEC has been more constructive on demand (still projecting growth, though revised lower in recent months). Your observation is spot-on and cuts through the noise.
Latest EIA (August 11 STEO): Global liquid fuels production is projected at ~100.8 mb/d for 2026 (down sharply from 106.1 in 2025), with consumption at ~102.7 mb/d. That implies a deficit. Inventory draws are estimated at 4.2 mb/d average in 2Q26 and another 3.8 mb/d in 3Q26. Shut-in production averaged ~5.5 mb/d in July; EIA assumes severe Hormuz constraints persist through August with gradual recovery in September, and expects most (but not all) production and trade patterns to normalize only in early 2027, with ~0.6 mb/d still offline through end-2027. Brent is now forecast at $87 average for 2026 (up from the July STEO’s $82) and $69 for 2027. Global production is expected to rebound strongly to ~109.7 mb/d in 2027 as supply recovers faster than demand.
The IEA’s August Oil Market Report, released today, paints an even tighter near-term picture. The agency now sees global supply falling 4.3 million barrels a day in 2026 to roughly 102 million barrels a day—a bigger drop than the previous 3.7-million-barrel estimate. Demand is also expected to slide 1.6 million barrels a day, worse than the earlier forecast for a decline of about 1 million. Put it together, and the IEA is looking at a full-year deficit of roughly 1.27 million barrels a day, up from about 860,000 barrels previously. The third-quarter gap could reach 1.8 million barrels a day, more than double the earlier estimate and the deepest quarterly shortfall since the fourth quarter of 2021. Middle East production remained 8.3 million barrels a day below prewar levels in July. Supply did rebound by 2.4 million barrels a day from June to 101.5 million, but it was still 6.3 million below a year ago. Here’s the catch: the IEA expects de-escalation to unleash a major comeback, with supply jumping 8.3 million barrels a day and demand rising 2.4 million in 2027. That would swing the market to a hefty 4.6-million-barrel-a-day surplus and start rebuilding inventories.
Then there’s OPEC. Its August Monthly Oil Market Report also landed today, and the group has generally stayed more upbeat on demand than either the IEA or EIA. In July, OPEC was calling for world oil demand to grow by about 800,000 barrels a day in 2026 to roughly 105.9 million barrels a day—a modest downgrade from its earlier view—before growth accelerates to around 1.9 million barrels a day in 2027. Most of that strength is expected to come from outside the OECD. OPEC has also kept the call on its crude relatively steady after revisions. The exact August numbers will sharpen the balance, but the broader message has not changed: OPEC still sees demand growth where the other agencies see much deeper contraction.
And that brings us to the real question. The EIA and IEA keep warning about tight supply, and the geopolitical risk is impossible to ignore. Yet if you want to buy a barrel of oil today, it still seems like somebody, somewhere, is ready to sell you one. OPEC trimmed its 2026 demand outlook but raised 2027, which should lend some support to the back end of the curve. And remember, that back end has been remarkably calm—almost too calm—about all this talk of looming supply tightness.
The EIA report comes out this morning at 10:30 a.m. ET. Before the API numbers landed, analysts were expecting a modest commercial crude draw of about 0.6 million barrels, solid declines in fuel inventories, and slightly lower refinery runs. Now the API build is the big story. If the EIA confirms anything close to a 9-million-barrel increase, oil could face real short-term pressure even with geopolitical risks still running high.
Nat Gas is trying to bottom as Fox Weather is talking heat — and that matters. A prolonged ridge is building across the South-Central and Southeast, bringing hazardous heat with highs in the lower 100s in parts of the southern Plains and Lower Mississippi Valley, widespread 90s farther east, elevated heat indices, and little overnight relief. Cooling demand should firm up power-sector burn and help put a floor under prices after the recent slide.
At the same time, we’re seeing the return of some LNG trains/feedgas. Freeport’s major maintenance (which cut feedgas sharply and weighed on demand) is expected to wrap up later this month. Corpus Christi Stage 3 continues its final ramp with Train 7 advancing, and Golden Pass keeps building as Train 1 operates and Train 2 commissioning progresses. That should lift overall U.S. LNG feedgas demand and export volumes after the summer maintenance soft patch.
Henry Hub has been trading in the high $2s (futures around $2.75–$2.80 range recently). EIA just cut its 3Q26 price forecast to an average of $2.87 on robust production and the temporary LNG feedgas hit, with storage headed toward a record ~3,985 Bcf by end-October (highest heading into winter since 2016 and ~5% above the five-year average). That surplus is real, but heat-driven power burn plus the LNG recovery can still support a bounce and limit further downside near term.
 Production is strong and inventories are comfortable, but the combination of late-summer heat (per the Fox Weather outlook) and LNG trains coming back online gives natural gas a chance to stabilize and try to bottom here. Watch the weather models and daily feedgas nominations closely and download the Foz Weather ap. As stay tuned to the Fox Business Network Invest in you! Also call me today at 888-264-5655 or Email me at pflynn@pricegroup.com to get my reports and to open your account call 888- 864-5665.

Thanks,

Phil Flynn

Senior Market Analyst & Author of The Energy Report

Contributor to FOX Business Network

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