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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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Back to the Russian Front. The Energy Report 08/27/2026

By On August 27, 2026 - 9:21 AM · In Market Commentaries, Phil Flynn Energy Report
Oil prices were plunging yesterday before reversing course as the market began to focus less on the decreasing risk from Iran and turned its attention to the Russian front. The bearish mood changed when reports emerged that Vladimir Putin had allegedly said talks with Ukraine were fruitless and that Russia was preparing to ramp up the war, including the use of ballistic missiles against Ukrainian cities.
Not only did this cause oil to reverse, but Russia’s threats to attack Ukrainian ports also triggered a surge in grain prices. Those markets were already feeling pressure from strong Chinese demand, tight crop supplies, and deteriorating conditions for Europe’s wheat crop.
Canola is also exploding to the upside on this news. Corn supplies are under pressure as well. As you may remember, high fertilizer costs led farmers to plant fewer corn acres and shift some acreage to other grains. At the same time, the biofuel market has taken off because of tight diesel supplies around the globe and a surging crack spread that is lifting all boats.
Meanwhile, the possibility that Ukraine could continue to strike Russian oil infrastructure and refining capacity remains a major concern for the global market. It is one reason we are not seeing more downward pressure on the diesel crack spread, even as traffic through the Strait of Hormuz increases and more energy products, including diesel, flow to Asia and Europe.
On top of that, silver and gold appear to be rebounding after retesting their breakouts to historic highs earlier this year. They may try to repeat that move as we head toward year-end and into next year. Remember, one reason the metals were hit hard after reaching record highs was the expectation that the Federal Reserve would raise interest rates three or four times. That has not happened. Even if the Fed does raise rates, it probably will not be as aggressive as the market feared during the great metals sell-off.
Getting back to oil, the key point is that the trend has been down. As we said on the first night of the invasion, that marked the high point of the Iran war. We also said it was very likely that Iran could not keep this up forever. Although Iran has held on longer than many anticipated, the country has lost the war. The economic pressure being placed on Iran will bring it to its knees or to the negotiating table. The market is already pricing in victory on the Iranian front. The wild card now is what is happening on the Russian front.
Natural gas is finally showing some life this morning, and the setup ahead of today’s EIA report looks much better than it did a week ago. Front-month futures are moving from the high $2.80s toward $2.93—a four-week high—after Wednesday’s $2.874 settlement. That is not a moonshot, but it is a real bid, and the weather is doing the heavy lifting.
Fox Weather has been pounding the table on this late-summer heat. The South has already baked under a dangerous heat dome, with more than 70 million people under heat alerts, feels-like temperatures above 100 degrees, and little overnight relief. That pattern is not over. After a brief mid-80s breather today and Friday, the ridge rebuilds this weekend. Sunday through early next week could bring temperatures in the 90s across the Midwest and South, heat indexes of 100–105 degrees, and air conditioners running hard again. St. Louis, Kansas City, Cincinnati, and Texas—the power-burn belt—are about to get another workout. That is exactly the type of late-August heat that shrinks storage builds and keeps gas-fired plants humming.
Last week’s storage report showed a modest increase of 16 Bcf, bringing inventories to 3,169 Bcf—still about 6% above the five-year average and just below last year’s level. The East and Midwest continue to inject, while South Central salt facilities have been withdrawing. If today’s number for the week ending August 21 comes in light because of the heat, the market has every reason to keep pressing toward $3.00. LNG is still consuming about 17.1 Bcf per day. Europe remains tight. The world still wants U.S. molecules.
This is not a new bull market yet. Production is strong, and inventories are comfortable. But cheap gas, a hotter Fox Weather map into September, and a storage report that could disappoint the bears create a recipe for a tradable bounce. A close above $3.00 on a tight report would change the tone. The heat is back. The bid is back. Let’s see whether the numbers confirm it at 10:30.
Download the Fox Weather app so you can see the heat before the market does. Stay tuned to Fox Business Network. Want the trade levels? Open your account by calling 888-264-5667 or emailing pflynn@pricegroup.com. Follow me on X at @EnergyPhilFlynn.

Thanks,

Phil Flynn

Senior Market Analyst & Author of The Energy Report

Contributor to FOX Business Network

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