Oil Market: Brent at $88 - A Week of Decline After Two-Week Rally
Oil prices experienced a wide range of fluctuations during the week. On Monday, Brent was down around 2.5%, falling to $92 in response to new US sanctions against Iran. By Thursday, the price retreated to $88, and on Friday, the market concluded the week with moderate declines. The result was a drop of over 5% for Brent and approximately 4% for WTI over five sessions. Still, since the beginning of the year, the benchmark remains about 25-40% above pre-crisis levels: the premium for geopolitical risk following the closure of the Strait of Hormuz in February has not dissipated. Key drivers of oil prices include:
- Diplomacy in Hormuz: The agreement between Iran and Oman on a temporary corridor and joint demining serves as the main bearish factor.
- The Venezuelan Factor: Reports of negotiations between Caracas and Washington regarding US companies’ access to oil fields have heightened expectations for increased supply.
- Firm Rhetoric: The White House's refusal to return to the terms of the June memorandum with Tehran briefly spurred the market upwards (+2.1% for Brent during the session).
- Russian Risk: Strikes on Russian refineries and ports are curtailing oil and petroleum product exports, providing upward support for prices.
The EIA forecasts an average price for Brent of around $85 in the third quarter and does not expect a return of Middle Eastern production to pre-war levels before early 2027. Global oil inventories continue to decline: according to the IEA, observed reserves have dropped by 410 million barrels since the onset of the war.
Venezuela and OPEC: A Blow to the Unity of the Cartel
The main corporate-political news at the end of the week is that Venezuela, one of the five founding countries of OPEC, is exploring plans to exit the organisation. The issue is being discussed in contacts with US officials alongside negotiations for access to Venezuelan oil fields by US companies; no final decision has been made. In July, the country's output was approximately 1.16 million barrels per day—half of what it was a decade ago—so the direct impact on the oil market balance is limited. However, the symbolic significance is enormous: following the recent departure of the UAE, yet another defection raises questions about the cartel's unity just ahead of the OPEC+ meeting on 6 September, where the baseline scenario remains a pause in raising quotas until the end of the year.
Strait of Hormuz: Six Months of Crisis and Iran-Oman Corridor
Friday marked six months since the beginning of the war that has closed this vital artery of the global energy market, through which around 20 million barrels per day of oil and petroleum products used to pass. The current framework for resolution appears as follows:
- Iran and Oman have agreed on a temporary shipping route: entry and part of the exit will occur through Iranian territorial waters.
- The parties have agreed on joint demining of the waters and sharing transit revenues.
- Technical negotiations on a permanent corridor and future management of the strait will continue.
Tehran emphasises that the complete opening of the strait is impossible without the US fulfilling its commitments, and the IRGC directly accuses Washington of delaying the deal. President Trump has stated that he is "in no rush," while the US Treasury prepares to demand that G20 partners reduce connections with Iran under threat of disconnection from the dollar system. For the energy sector, this means maintaining high volatility: physical flows are recovering slowly, and insurance rates remain prohibitive.
Gas and LNG: Europe Between €65 and €100 per Megawatt-hour
The gas market remains the most vulnerable segment of the global energy sector. TTF futures pulled back from a 3.5-year high of €68.46, concluding the week around €65 per MWh amid news of de-escalation. The fundamental picture is concerning:
- Storages: EU underground gas storage is only ~61-63% full—its lowest level for the end of August in many years, compared to almost 74% a year earlier; the target level for 1 November has been revised down to 80%.
- Forecasts: In the event of a cold winter and slow recovery of Qatari exports, analysts anticipate a December TTF price above €100/MWh.
- Asia: Spot LNG JKM is holding around $21–22/MMBtu, with competition for Atlantic cargoes intensifying in the autumn.
- USA: Henry Hub remains below $3/MMBtu amid record production—US LNG is becoming the main resource to close the European deficit.
Petroleum Products: Record Diesel Deficit in the Atlantic Basin
US refineries are operating at around 97% capacity, but diesel inventories have fallen to seasonal lows in the historical record. Europe, having lost Middle Eastern and some Russian volumes, has for the first time in seven years sourced diesel from Mexico. Crack spreads for middle distillates remain at record highs—this is a key source of margin for refineries and fuel companies, while it poses an inflationary factor for consumers on the threshold of the heating season.
Russia: Declining Refining and the Fate of Diesel Exports
The domestic fuel market in Russia remains under manual control. The ban on gasoline exports is in place until 31 January 2027, and on aviation kerosene until the end of November. The embargo on diesel fuel exports expires on 1 September, and according to industry sources, authorities intend to extend it at least until the end of September; a further extension until the end of the year is also being discussed. Reasons for this include the aftermath of drone attacks on refineries, a return to local deficits in several regions in August, and refining rates at their lowest in over two decades. For the global market of petroleum products, this implies a loss of Russian diesel volumes at the peak of European deficits; for the domestic market, it means an import of fuel from Belarus and Asia as a safeguard.
Energy, Renewables, and Coal: Crisis Extends the Era of Coal
The energy crisis has rewritten the trajectory of the energy transition. Expensive LNG has made coal more competitive in Europe and Asia: estimates suggest that coal generation will account for nearly a third of global electricity production in 2026. Simultaneously, renewable energy is accelerating where there are domestic resources: in the USA, solar generation grew by over 20% in the first half of the year, and for the first time, wind and solar energy surpassed coal and nuclear combined. Restraining factors include tariffs on solar modules and a pause in the approval of new data centres in Texas, cooling forecasts for electricity demand growth.
Week Ahead: Key Monitoring Dates for Energy Market Participants
- OPEC+ meeting on 6 September: decision on quotas for October and reaction to the Venezuelan defection.
- Russian government's decision on diesel fuel exports after 1 September.
- Progress in technical negotiations between Iran and Oman and dynamics of transit through the Strait of Hormuz.
- Gas injection rates in European underground storage and TTF prices as summer concludes.
- Signals from Washington regarding Venezuelan oil fields and sanctions pressure on Iran through the G20.
Conclusion
The oil market is drifting towards a scenario of gradual de-escalation in the Middle East but remains hostage to physical flows through Hormuz and the integrity of OPEC, which is being tested by Venezuela's potential exit. Gas and diesel have become the main points of deficit in the global energy market for autumn 2026, while coal has received an unplanned reprieve in the energy transition. For investors and energy companies, the coming week—with the OPEC+ meeting and Moscow's diesel decision—will be pivotal for positioning going into the fourth quarter.
