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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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Diesel Crack Relief. The Energy Report 10/06/2026

By On October 6, 2026 - 9:11 AM · In Market Commentaries, Phil Flynn Energy Report
We’re seeing relief in the part of the energy complex that has felt the most pressure: the diesel crack. It has fallen below $100, down $4.49 overnight, signaling that Europe’s release of supplies is easing panic buying.
After a stretch that pushed European diesel cracks through $100 a barrel for the first time on record and the US crack trading as high as $113. Saw diesel trading at more than twice the price of the crude underneath it. Seeing the premium is back under $100 is a welcome sign and a sign that the oil release that was pressured and put together by the Trump adminstrations is starting to have the desired effect.
 Crude is softer with it, down to $8750 as we write this a far cry from the $119 a barrel the first night after the US attacked Iran. the diesel crack is finally coming off the boil, and it is not because the Middle East suddenly got quiet. It is because barrels are moving again and policy is getting out of the way.
Part of the relief is the G7 move last week to unlock about 100 million barrels of oil and fuel, coordinated through the IEA, spread over roughly four months, with a chunk of diesel front-loaded in the opening weeks. That is real supply hitting a market that had been pricing scarcity.
And as Bloomberg reports, oil flows from the Middle East are back to about 80 percent of pre-conflict volumes. Shell CEO Wael Sawan put one of the clearest markers on it yet at the Energy Intelligence Forum in London on Tuesday: “Despite everything happening, we’re now close to 80-plus percent of prewar levels, showing the resilience of many of these nations to continue to honor their commitments to supply the world.”
Wholesale diesel cracked lower on that news. ING put the ICE gasoil crack down from around $85 a barrel midweek to about $70. Pantheon figures that if the drop reaches British pumps, drivers could see something on the order of 5 to 6 pence a litre come off diesel. What is a pence again?  Not Mike, I can assure you.
Here at home, President Trump took the export-ban threat off the table once the allies moved. “We’re not going to be doing the export ban. We were never going to do it,” he said Friday. Yet President Trump used the threat of an export ban to get Europe to move but at the same time he’s sending a signal that the US is the world’s most reliable supplier to our exporters
Reuters report that around 12 million barrels of crude oil and 2 million barrels of refined products have left the Middle East per day in the last seven to ten days, according to Vitol CEO comments on Tuesday. He told the Energy Intelligence Forum in London that without a steady flow of 10 to 14 million barrels a day leaving the region on ships, energy markets will destabilize going into winter because inventories in the West are low. He added that a shutdown of those volumes might push benchmark crude to $200 a barrel. That is the risk that has not gone away.
Then came the move farmers and truckers will actually feel at the pump. On October 5 the Trump administration signed an executive order temporarily allowing off-road “dyed” diesel — the red-dye fuel that normally stays off the highway because it is not taxed — to be used on the road, and deferring the federal excise tax for the rest of the year, without interest or penalties. Treasury is told to look at wiping the deferred tax altogether. Transportation is coordinating with the states. Agriculture is directed to make sure farmers can still get dyed diesel in the high-demand counties, and to push the states to do the same.
The White House puts the trucker savings at more than $100 a refill. For a farm running combines, grain trucks, and irrigation through harvest, that is real money, not a talking point. It does not print new barrels. It widens the pool of diesel that can legally move freight, and it cuts the tax wedge that had been sitting on top of an already brutal crack.
Lower effective prices for the people who grow the food and haul it is how you keep the harvest moving. The crack is easing because supply is showing up and Washington stopped threat of European diesel hoarding.
 Add the chatter out of Tehran. Iran’s oil minister, Mohsen Paknejad, resigned as the rial hit fresh lows, inflation ran near 85 to 90 percent, and the IMF penciled in a contraction of about 5.4 percent — the worst since the 1980s. No Iranian crude has cleared the U.S. naval blockade since mid-July, floating storage outside the Gulf is thinning, and the rumor mill is that Iran’s military is telling the oil ministry to shut wells in rather than fill tanks it cannot empty.
 Reports say that President Masoud Pezeshkian accepted the resignation Sunday after turning Paknejad down more than once. State media called it personal reasons. You’re going to be much more personal than a tanking currency in the military that it’s not getting paid and can’t feed their families.
 Hours before the announcement, Paknejad was still insisting that money from oil already sold was coming home. Maybe it’s like lassie come home but it could take time you know.
 Days earlier, the Farhikhtegan newspaper reported that a trustee network set up on his watch to repatriate sanctioned crude owed National Iranian Oil Company close to $2 billion. Parliament’s energy commission opened an inquiry. Pezeshkian named NIOC chief Hamid Bovard acting oil minister.
The currency market did not wait for the paperwork.   Reports say that the dollar traded at a record 269,000 tomans this week — about 2.69 million rials — up roughly 12 percent since September 9 and more than 10 percent in a month.
The Guardian put inflation at 85 percent; CNN put the latest annual rate near 90 percent, the highest since World War II, with food inflation around 130 percent.
 A minimum monthly wage of 166 million rials is worth about $66. Tehran’s mayor froze prices on a dozen staples for six months. Nurses and teachers are walking off the job because pay no longer covers the bazaar.
The IMF’s July call of a 5.4 percent contraction for 2026 already looks light. Iran’s own statistics office printed a 10.1 percent year-on-year drop from March 21 to June 20, led by a 26 percent collapse in oil and gas extraction. The World Bank now has Iran down 7.7 percent for the year. And I am taking the under unless Iran surrenders.
On the water, the blockade reinstated July 14 is doing what years of sanctions did not. United Against Nuclear Iran has not tracked a crude-laden tanker that cleared the Gulf of Oman and beat U.S. enforcement since July 12.
Reuters, citing Kpler, Vortexa and TankerTrackers, said in early September that no Iranian crude had successfully transited Hormuz for China in the seven weeks after the blockade went back on.
 Kpler says September was the first month since its records began in 2013 with zero crude loaded at Iranian ports; the last successful loading was August 25.
Treasury Secretary Scott Bessent said the same thing over the weekend: Iran loaded zero crude onto tankers last month. At least 50 laden tankers are stuck along the Iranian coast, a cluster of them off Kharg.
What is left to sell is the oil already outside the line, and that buffer is being drawn down. Kpler puts crude outside the blockade zone at about 45 million barrels, down from roughly 100 million in July. Traders say most of it is already committed to China.
Bessent’s late-September line was that only about 15 million barrels were still out for delivery and that Tehran would soon have “nothing left to trade.” Onshore stocks are the mirror image — near 70 million barrels, close to the pandemic peak — because new oil has nowhere to go. Production has been cut to about half the prewar rate, roughly 2 million barrels a day, barely domestic demand.
That is the military chatter. With Kharg inventories falling even as loadings stall, the read from tanker trackers is that NIOC is already shutting in rather than letting tanks top out. Kpler has warned that usable storage is down to a matter of weeks and that forced shut-ins in mature carbonate fields may not all come back. Mohsen Rezaei at the Supreme National Security Council has called this one of the hardest periods in the Islamic Republic’s history and has talked up a new Gulf exclusion zone running out to the U.S. blockade line. The joint military command has threatened to widen disruption into the Gulf of Oman and the Red Sea unless Washington lifts the cordon. Separate market talk, unconfirmed, is that some Gulf barrels moving the southern Hormuz route are paying a security toll, and that ships that refuse are the ones getting hit. Tehran’s official line is still endure or escalate. The oil data says the clock on endure is running out.
Add the chatter out of Tehran. Iran’s oil minister, Mohsen Paknejad, resigned as the rial hit fresh lows, inflation ran near 85 to 90 percent, and the IMF penciled in a contraction of about 5.4 percent — the worst since the 1980s. No Iranian crude has cleared the U.S. naval blockade since mid-July, floating storage outside the Gulf is thinning, and the rumor mill is that Iran’s Miltary is
The other weight on the complex is coming from the trade desk, and it is the good kind. Washington and Beijing are moving on a China–U.S. tariff cut in the 10 to 12 percent range, on top of the $30-billion-for-$30-billion list of non-sensitive goods already rolled out after the Trump–Xi summit — U.S. farm goods and coal one way, Chinese consumer goods the other. Lower tariffs mean cheaper freight, steadier demand for what the farmer grows, and less reason to hide a war premium in every barrel.
There is a geopolitical bright spot to match it. The Trump administration and Beijing are discussing reciprocal visits to nuclear sites — labs, and possibly test sites — raised on the Chinese side and still informal, but real enough that it is on the agenda for meetings in the months ahead. After a year with no remaining U.S.–Russia arms treaty, two rivals talking about opening doors, cutting tariffs, and looking under each other’s hoods is the kind of headline energy markets like. Confidence is a bearish input for the risk premium.
None of this fixes the structural hole. Gulf refined products are still not flowing the way the world needs them to, Russian runs are impaired, and winter diesel demand has not gone anywhere. The release buys time. The red-dye waiver buys relief at the nozzle. Neither rebuilds the barrel. Cracks can firm again if the barrels are slow to show up or if the Strait stays noisy. For today, though, the tape is doing what a functioning market does when governments deliver supply, cut the tax on diesel, and cut the tax on trade: it marks prices down.
Stay upbeat. The crack under $100 is a gift to truckers, farmers, and anyone heating a building this winter, and the dyed-diesel waiver puts more of that gift in their pocket. World leaders got tight on reserves, Iran’s oil machine is sputtering, and Washington is opening the red-dye tank while it talks tariffs and nuclear sites with Beijing. The bull case is not dead. It just has to wait its turn.
OilPrice reports that the Houston oilfield-services giant has signed two agreements aimed at rebuilding Venezuela’s natural gas and energy infrastructure, including a partnership that could eventually open the door to the country’s first LNG exports.
In Caracas, Baker Hughes signed a strategic alliance with state oil company PDVSA, Lindsayca and Fulcrum LNG to restore and expand gas infrastructure. The first job is practical: identify the upgrades needed to meet PDVSA’s own gas needs and put more supply into the domestic market, including gas for power generation. Venezuela has spent years flaring and stranding gas while the grid failed. Fixing that is the on-ramp.
Longer term, the partners plan to evaluate and potentially finance new open-access midstream and LNG infrastructure. That would let PDVSA and other producers commercialize stranded gas and, eventually, export LNG. Baker Hughes CEO Lorenzo Simonelli said the goal is an integrated gas value chain that turns Venezuela’s resource base into reliable domestic supply and future export opportunities, including the first LNG molecules produced in the country.
Roles are clear. Baker Hughes brings field-development, gas-infrastructure and LNG technology. Lindsayca brings engineering, construction and operations. Fulcrum handles midstream and LNG development, financing and market access.
This is still a cooperation framework, not a final investment decision. Individual projects need separate agreements, internal approvals, and compliance with U.S. sanctions and export controls, including any required authorizations from Treasury’s Office of Foreign Assets Control. The door is open. The money is not fully committed yet.
Separately, Baker Hughes signed a memorandum of understanding with New Stratus Energy covering future Venezuelan oil and gas development. That partnership would use Baker Hughes’ subsurface, drilling, production, processing, digital, power and LNG kit to accelerate projects.
The company is not a newcomer. It has operated in Venezuela for more than 60 years, with more than 1,200 oil production systems and about 240 turbomachinery units across 23 sites. What is new is the direction of travel: U.S. service capital and technology lining up to rebuild infrastructure, feed the domestic market, and put Venezuela’s gas on a path toward export.
For the oil market, this is not a barrel tomorrow. It is a signal that investment is starting to follow policy, and that stranded Venezuelan gas is back in the conversation.
Fox Weather reports that Tropical trouble shifts closer to home as Invest 92L is likely to drench parts of the Gulf Coast . Fox Weather says that “An invest has been designated in the southern Gulf amid the quietest start to an Atlantic hurricane season since the start of the satellite era (1966), with no hurricanes having formed this year.” Invest 92L has officially been designated in the southern Gulf.
A storm could begin to form sometime Thursday or Friday.
Even if the system does not become tropical, the Gulf Coast could see another round of heavy rain and potential flash flooding this weekend.
An invest has been designated in the southern Gulf amid the quietest start to an Atlantic hurricane season since the start of the satellite era (1966), with no hurricanes having formed this year.
The National Hurricane Center (NHC) has designated a brewing tropical disturbance as Invest 92L, and the storm is likely develop in the Bay of Campeche later this week.
The term “invest” is used every hurricane season in the Atlantic and the Eastern and Central Pacific basins, accompanied by a number from 90 to 99 and either the suffix “L,” “E” or “C,” respectively.The odds of development continue to increase, with a 60% chance in two days and an 80% chance of developing within a week, respectively. Make sure you download the Fox Weather app to keep up with the storm. Also make sure you stay tuned to the Fox business Network. Call today to open your account by calling me at 888-264-5665 or email me at pflynn@pricegroup.com.

Thanks,

Phil Flynn

Senior Market Analyst & Author of The Energy Report

Contributor to FOX Business Network

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