Oil Market: Weekly Gains Amidst Risk Premium
On Friday, oil prices experienced a moderate decline; however, the week concludes positively for the oil market. The December futures for Brent traded in the range of $105–105.5 per barrel, while WTI was around $97.
- Weekly dynamics: Brent increased by less than 1%, WTI rose by about 6%.
- US Stocks: commercial oil stocks fell by 8.5 million barrels in the week ending October 9, contrary to expectations for a slight increase. This marks the largest decline since the onset of the war.
- Hurricane factor: some production in the Gulf of Mexico was temporarily halted, which supported the American grade.
- Brent-WTI spread: narrowed to around $8 per barrel after exceeding $9 at the beginning of the week.
Brent remains approximately 70% more expensive than a year ago. Analysts note that the market retains a significant geopolitical risk premium, which can only be fully lifted through an agreement between the USA and Iran.
Strait of Hormuz: Oil Flows Recovering, but Unpredictably
The situation in the Strait of Hormuz continues to be a primary factor influencing oil, LNG, and petroleum product prices.
- Raw material flows. In the week ending October 13, an average of around 11.6 million barrels per day transited the strait — approximately 68% of the pre-war level of 17.15 million.
- Shipping. The number of transits decreased to 131 for the week. Many container lines have rerouted their paths to bypass the strait.
- Incidents. Following the sinking of the container ship GFS Pride, new reports of a fire on a tanker in the Gulf of Oman emerged.
- Conflicting signals. Tehran claims that the strait is closed, while the US military command reports that over 19 million barrels of oil are passing per day under convoy.
High prices render voyages commercially viable even amid military risks: the demand from Asian buyers incentivises shipowners to continue transport activities.
IEA and G7: Second Major Release of Reserves This Year
The IEA has decided to release the remaining 100 million barrels as part of the March agreement, including over 20 million barrels of diesel fuel. This is a continuation of the G7 countries' agreement made on October 2 to release reserves over a four-month period, with priority deliveries of diesel in the first 20 days.
- The diesel refining margin in Europe fell by nearly 2% following the announcement.
- Some analysts believe that the reserves only partially ease tensions in the middle distillates market.
- The US is considering easing sanctions against vessels from the "shadow fleet" to reduce record freight rates.
Fuel Oil—The New Bottleneck Segment
In addition to diesel, a deficit in marine fuel is worsening. According to Vitol, the conflict in the Middle East has reduced fuel oil supplies from the Persian Gulf by about 800,000 barrels per month, and strikes on Russian refineries have cut supply by another 1 million tonnes per month. For bunker companies and shipping, this means sustained high fuel prices.
OPEC+: Quotas on Hold, Production Below Targets
The seven key OPEC+ members — Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman — have maintained their quotas unchanged for November.
- Target levels: around 10.5 million barrels per day for Saudi Arabia, 9.9 million for Russia, and 4.4 million for Iraq.
- Actual production from the core alliance in August was around 25 million barrels per day — approximately 5 million below pre-war levels.
- About 2 million barrels per day in reductions remain in effect.
- An audit of production capacities will determine the baseline production levels for 2027.
The next meeting of the alliance is scheduled for November 1. OPEC+'s influence on the physical oil market remains limited: logistics in the Persian Gulf play a crucial role.
Gas and LNG: Europe Enters Winter with Inventory Deficits
The European gas market remains one of the most pressured segments of the global energy landscape.
- Prices: TTF futures are trading around €86 per MWh, approximately 2.6 times higher than the level a year ago.
- Storage: EU gas storage is about 74% full, against a five-year average of around 89%. Brussels has lowered its target from 90% to 80%.
- Asia: The JKM indicator is around $26 per MMBtu, with Europe and Asia in competition for every LNG cargo.
At the Russian Energy Week, the notion of a “golden age” for gas was presented: it is no longer perceived merely as a transition fuel. Notably, SOCAR announced its intention to purchase gas from Gazprom — a signal of a restructuring in regional gas flows.
Coal: Expensive LNG Restores Demand in Asia
Newcastle energy coal is trading around $150 per tonne. The October high of $152.20 marked the highest level since October 2024, with annual growth exceeding 40%.
- Quality energy coal is approximately $20 per MMBtu cheaper than LNG in key Asian markets.
- Combined coal imports by China, Japan, and South Korea in Q4 could increase by about 20 million tonnes.
- In Russia, industry estimates suggest coal producers’ losses could decrease by approximately 200 billion roubles by 2027.
Electric Power and Renewables: Focusing on Reliability
The energy crisis is accelerating investments in both renewable energy and backup generation.
- In Europe, energy companies are combining solar plants with storage facilities, thereby reducing dependence on gas during peak hours.
- In Russia, Gazprom Energoholding plans new plants in Moscow with a capacity of up to 480 MW, while distributed generation is being discussed as a necessary measure.
- On October 29, the IEA will present its Renewables 2026 report with updated forecasts for renewable capacity additions.
Russia: Oil Products Market, Refineries, and Production
The domestic fuel market in Russia is showing short-term stabilisation amidst restrictions and a diesel deal with the USA.
- Retail: the average price of petrol is 78.68 roubles per litre, and diesel fuel is 86.67 roubles. Since the beginning of the year, petrol prices have increased by 21.4%, and diesel by 13.5%.
- Export: the ban on gasoline exports is in effect until January 31, 2027, while restrictions on diesel exports have been lifted early.
- Diesel deal: shipments to the USA and global markets are set at 300,000 tonnes in October, 500,000 tonnes in November, and 1 million tonnes in December.
- Production: The Laya Vozhskoye field in the Nenets Autonomous Okrug has been launched into pilot production. The Ministry of Energy and the Ministry of Finance are refining tax incentives for hard-to-recover reserves.
A key risk for the refining sector is the state of refineries following the breakdown of the "energy ceasefire": refinery capacities directly affect the export volumes of oil products.
What Matters to Energy Sector Investors Next Week
- Strait of Hormuz: an increase in oil flows could lower the risk premium, while new attacks could push Brent back to $110.
- IEA Reserves: the pace of diesel deliveries to the market will determine the dynamics of crack spreads and refinery margins.
- Sanctions Against the "Shadow Fleet": an official US decision could reduce freight rates.
- EIA Data on US oil inventories on October 21.
- Bank of Russia Meeting on October 23: inflation has accelerated to 7.2%, which is critical for assessing oil and gas company shares.
- Political Calendar: OPEC+ meeting on November 1 and the US midterm elections on November 3.
The week’s conclusion: the global markets for oil, gas, coal, and petroleum products remain structurally deficit. The release of strategic reserves and new logistical schemes alleviate price spikes but do not eliminate the fundamental cause of tension — instability in supply from the Persian Gulf. For participants in the energy sector market, the priorities remain hedging against price risks, diversifying supplies, and controlling refining margins.
