Oil Market: Brent and WTI Decline but Stay Above $100
On Thursday evening, Brent was trading around $104 per barrel, with WTI around $101-102. Earlier in the week, Brent peaked at $109; over the month, the benchmark has gained approximately 14%, and compared to a year ago, it has risen by more than 50%. Key drivers include:
- Saudi Arabia: The kingdom anticipates restoring nearly half of the East-West pipeline's capacity, damaged by drone attacks last week, within a few days, reaching full capacity in about six weeks. The route, with a capacity of up to 7 million barrels per day, is the main bypass of the Strait of Hormuz.
- Hormuz: According to the US Department of Energy, around 18 million barrels of oil and petroleum products passed through the strait at the start of the week; Riyadh is increasing shipments with support from US military forces.
- US Stocks: Commercial crude stocks decreased by 0.64 million barrels to 423.4 million, below market expectations, despite industry forecasts indicating a rise of 7.1 million barrels the day prior.
- Supply Risks: The Houthi’s advance toward the Bab-el-Mandeb Strait, the shutdown of several oil fields in Libya with a risk of force majeure, and Tehran's refusal to negotiate with Washington until its conditions are met.
Supply and Demand: OPEC and IEA Estimates
- Saudi Arabia reported to OPEC an August production decline to 6.24 million barrels per day — the lowest since 1990; secondary sources estimate the level closer to 7.3 million barrels per day.
- The IEA, in its September report, lowered the global supply forecast for 2026 to 100.7 million barrels per day (down 5.7 million barrels per day year-on-year).
- Global demand for oil is expected to decline by 2.5 million barrels per day in 2026, with a recovery of 2.6 million barrels per day in 2027, according to the agency.
- Observed global stocks decreased by another 95 million barrels in August, accumulating a reduction of 507 million barrels since February.
Refined Products and Refineries: Diesel is the Main Market Shortage
The crisis is increasingly shifting from crude oil to refined products. Wholesale diesel prices in the US exceeded $200 per barrel at the beginning of September — nearly double the pre-war levels, with retail prices reaching a record $5.90 per gallon. In the EU, diesel costs around €2.04 per litre, close to the record set in April.
- Net diesel exports from Gulf countries in August amounted to approximately 390 thousand barrels per day — a quarter of the pre-war volume; cumulative shipments from the Gulf and Russia are 1.6 million barrels per day lower than in February.
- Global refining reached a summer peak of 81.4 million barrels per day, but a decrease of 2.6 million barrels per day is expected for the year.
- Refinery margins in the Atlantic Basin are at record levels; profitability in Singapore is constrained by high freight costs.
For refineries outside the conflict zone, this is a period of windfall profits, while for fuel companies and consumers, it is a shock to costs.
Gas and LNG: Europe Enters Winter with Low Stocks
TTF futures fell to €76-77 per MWh on Thursday after attempting to consolidate above €80; earlier in the week, prices approached €82 — the highest since late 2022. Year-on-year, gas prices in Europe have increased by over 130%. EU storage is only about 68% full — one of the lowest levels for this date in two decades. Supply pressure is being created by limited Qatari LNG deliveries, scheduled maintenance in Norway, and competition with Asia for cargoes. Henry Hub in the US holds at around $2.90 per million BTU — the record spread supports US LNG exporters.
Geopolitics: Energy Truce Between Russia and Ukraine in Question
On 14 September, the US President announced that Moscow and Kyiv had agreed to cease strikes on energy facilities, linking the rise in diesel prices primarily to this conflict. Kyiv stated that the agreement is not finalised and can only be achieved with partners' guarantees; Turkey is acting as a mediator. Past attempts at similar truces have proven short-lived. If the regime is implemented, the restoration of Russian refining could reduce the distillate premium. However, the sanctions regime remains unchanged.
Russia: Fuel Export Restrictions Persist
- The ban on gasoline exports is in effect for all market participants until 31 January 2027.
- The ban on the export of diesel, marine fuel, and gasoil for producers has been extended to 30 September; the market awaits a decision for October.
- According to the IEA, over eight months, Russian refineries have faced effective hits on average every three days; since July, the country has begun to import refined products.
- The discount of Urals to Brent has nearly disappeared amid declining shipments and high demand in Asia.
Asia: China Undercuts India in the Battle for Russian Oil
Russian oil imports in India fell by approximately 26% in August to around 2.1 million barrels per day, down from a record 2.8 million barrels per day in July; overall crude imports dropped to 4.6 million barrels per day. Chinese refiners are aggressively purchasing cargoes, replacing Middle Eastern volumes, while India partly compensates for losses with Venezuelan oil. The raw material shortage at Indian refineries threatens to reduce diesel and gasoline exports — an additional factor of tension in the Asian refined products market.
Electricity, Renewables, and Coal: Insurance and Structural Shift
- Coal: Thermal coal in Newcastle is around $145 per tonne (+12% over the month, +40% year-on-year). The shortage of LNG adds around 70 million tonnes of demand in 2026; coal generation in Japan increased by 11%. Major producers are not sanctioning new mines, considering the surge to be cyclical.
- Renewables: By the end of 2025, renewable sources surpassed coal in global output for the first time (33.8% versus 33.0%), and in April 2026, wind and solar generated more electricity than gas for the first time (22% versus 20%). Solar capacity additions in 2025 reached a record 647 GW.
Expensive imported gas strengthens the economics of renewables and storage, but in the short term, coal and nuclear provide system balancing.
Macroeconomics: The Fed Responds to Oil Inflation
On 16 September, the Fed unanimously raised rates by 25 basis points to 3.75-4.00% — the first increase since 2023 — and signalled the possibility of another step before the end of the year. The regulator acknowledged that it cannot influence oil prices but aims to prevent inflationary spillover. The yield on 10-year US bonds stands at around 5%. For the energy sector, this signifies a rise in capital costs: capital-intensive renewable energy, grid, and LNG projects are under pressure, whereas oil companies with strong cash flows appear more resilient.
What Investors and Energy Market Participants Should Monitor on Friday
- The pace of restoration of the East-West pipeline and shipments from Yanbu.
- Tanker traffic through the Strait of Hormuz and the Bab-el-Mandeb Strait.
- Confirmation of the energy truce by Moscow and Kyiv.
- Russia's decision on diesel exports after 30 September.
- The dynamics of TTF, the injection rates into European underground gas storage, and the schedule of Norwegian maintenance.
- Weekly drilling activity statistics in the US and diesel crack spreads.
The base scenario for the coming days is oil in the range of $100-110 per barrel, with heightened sensitivity to news from the Middle East. Refined products and gas remain the tightest segments of the global energy market.
