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Perspective: Mid-Day Commentary for August 26

By: Mike Castle, Market Intelligence - Fertilizer Analyst

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Guest Commentary by Mike Castle

Senior Commodities Economist

August 26 – It’s a quiet day on Wall Street despite the tranche of data released today, with focus shifting to chip giant Nvidia’s earnings report due out after today’s close. The major stock indexes are all quietly lower at midday, down anywhere from 0.25% to 0.35% at the time of writing, while the VIX remains muted as it hovers near 15.6. The dollar has firmed through the morning, reflecting some additional hawkish sentiment after this morning’s inflation data, as it trades at 99.17, its highest level since last Wednesday’s selloff. Treasury yields are working higher as well, with 2-year yields up to 4.23%, 10-year yields up to 4.668%, and 30-year yields up to 5.186%. Crude oil has reversed course from this morning’s losses to now trade in the green amid rumblings of more escalations in the Black Sea region as well as a more bullish than expected D.O.E. report this morning, with nearby WTI now up 2.1% on the day to trade near $82.80 and nearby Brent up 0.6% to trade near $87.80. The ags are surging higher at midday, with the wheat complex now leading the way higher amid additional concerns regarding supply from the Black Sea following wire reports stating Putin is planning escalation with Ukraine, though details to this point are scarce.

While today’s July inflation data came in largely as expected, the quarterly PCE price indexes embedded in this morning’s second quarter GDP revision painted a somewhat uglier picture of the U.S. inflation backdrop. The second quarter headline and core PCE Price Indexes were both revised 0.2% higher than their preliminary estimates, now pegged at 5.3% and 3.6% year-over-year growth, respectively. As I outlined in this morning’s comments regarding the July figures, these are backward-looking numbers, but it’s important to keep in mind the strength in underlying inflationary pressures moving forward. This round of inflation may prove stickier than expected, and all metrics remain notably above the Fed’s 2.0% mandate, keeping some amount of hawkish pressure present.

U.S. commercial crude oil stocks rose by 0.095 million barrels week-over-week in the week ending August 21st, smaller than the estimated 0.597-million-barrel build. Part of this was a 6.6% week-over-week drop in crude oil imports to 6.158 million barrels, a four-week low, more than offsetting the decline in weekly exports. The other driving force was the unexpected weekly 0.2% uptick in refinery utilization to 97.4%, with analyst estimates calling for a 0.2% decline to 97.0%. This coincides with a weekly draw from the SPR of 3.696 million barrels, bringing total crude oil stocks in the SPR to 289.73 million barrels, now representing the lowest level seen since late November 1982.

The bigger standout came on the refined product side, with both gasoline and distillate stocks seeing sharper than expected weekly draws. Gasoline stocks fell by 2.536 million barrels week-over-week versus the average analyst estimate of a 0.670-million-barrel draw to bring total gasoline stocks to 206.84 million, the lowest level seen since early November 2025. Distillate stocks fell by 2.228 million barrels week-over-week versus the average analyst estimate of a 1.570-million-barrel draw, bringing total distillate stocks to 103.391 million barrels, a seven-week low. Distillate stocks had been rebounding nicely this summer after touching a 23-year low in late May but have reversed course and declined for four consecutive weeks. While much of the market focuses primarily on crude oil, we continue to point to the bigger stress in the energy markets being in the refined products, and today’s report certainly supports that assertion.

U.S. average retail diesel prices have risen by $0.34/gallon during this four-week stretch of draws, bringing the national average to $5.65/gallon, officially setting a new high for 2026 and now only $0.16 away from the all-time high set back in 2022. From the macroeconomic perspective, this obviously translates to extended inflationary pressures, as effectively everything we consume is transported via truck at some point. Higher fuel costs translate to higher freight rates, which ultimately translates to either increases being passed along or margins being compressed.

Tying this back to the domestic ag markets, this tightness in refined products may come more into focus as combines start rolling in the Midwest in the weeks ahead. Midwest average (PADD 2) diesel prices have risen $0.44/gallon during the four-week stretch of distillate stock draws, now up to $5.64/gallon. These are the highest prices seen in the Midwest since May—farmers who opted not to fill their tanks after spring field work was complete this spring due to prices being too high will likely not be much happier with the costs they face this fall. The graphic below highlights this phenomenon, with Midwest average diesel prices (in dollars per gallon) surpassing new crop December corn futures (in dollars per bushel) shortly after the war in the Middle East broke out, and holding above them through today, despite the sharp break higher.

image 136573

 

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Perspective: Mid-Day Commentary for August 26

August 26 – It’s a quiet day on Wall Street despite the tranche of data released today, with focus shifting to chip giant Nvidia’s earnings report due out after today’s close. The major stock indexes are all quietly lower at midday, down anywhere from 0.25% to 0.35% at the time of writing, while the VIX remains muted as it hovers near 15.6. The dollar has firmed through the morning, reflecting some additional hawkish sentiment after this morning’s inflation data, as it trades at 99.17, its highest level since last Wednesday’s selloff. Treasury yields are working higher as well, with 2-year yields up to 4.23%, 10-year yields up to 4.668%, and 30-year yields up to 5.186%. Crude oil has reversed course from this morning’s losses to now trade in the green amid rumblings of more escalations in the Black Sea region as well as a more bullish than expected D.O.E. report this morning, with nearby WTI now up 2.1% on the day to trade near $82.80 and nearby Brent up 0.6% to trade near $87.80. The ags are surging higher at midday, with the wheat complex now leading the way higher amid additional concerns regarding supply from the Black Sea following wire reports stating Putin is planning escalation with Ukraine, though details to this point are scarce.

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