Oil Market: Brent Balances at $100
Oil prices are concluding the week with high volatility. On Friday, Brent fell by approximately 2.5% to just below $100 per barrel, while WTI dropped nearly 4%, approaching $89. Just the day before, Brent was holding above $102. Despite the correction, oil remains roughly one and a half times more expensive than it was a year ago.
Prices are influenced by mixed factors:
- Reserves: The European Commission is in discussions with IEA participants regarding the timing of a new coordinated release of strategic reserves.
- Export Recovery: Non-Iranian oil shipments through the Strait of Hormuz returned to pre-war levels of 13.5 million barrels per day at the end of September, as per tracking data, thanks to convoyed vessel passage.
- Security Risks: This week, three tankers in the Strait were struck by unidentified projectiles, while US-Iran negotiations remain stalled.
- Stocks: According to the US Department of Energy, global oil stocks have decreased by approximately 400 million barrels since the beginning of the year.
OPEC+: Meeting on October 4 and the Quota Question for 2027
On Sunday, October 4, seven key OPEC+ members – Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman – will hold their monthly meeting. According to sources, the quotas for November are expected to remain unchanged. The formal production targets have long diverged from reality: the alliance's actual output is approximately 5 million barrels per day below pre-war levels, as Gulf states are unable to fully export their crude.
The main intrigue shifts to 2027: the alliance is completing an audit of production capacities, based on which new baseline levels of output will be determined. This is a matter of long-term market share allocation for oil companies and investors.
Oil Products and Refineries: Diesel Becomes the Main Shortage
The market for oil products is currently more strained than the crude oil market. Diesel fuel prices are setting records in many countries, exceeding $6 per gallon in the US. Supply has plunged across several fronts in just a few days:
- China has suspended exports of gasoline, diesel, and aviation fuel for October, except for supplies to Hong Kong and Macau. Domestic fuel reserves have fallen to multi-year lows, with a decision on restarting expected after the holidays ending on October 7.
- Russia has extended its diesel export ban for producers until October 31.
- India: An explosion at a major export-oriented refinery led to the cancellation of several tenders.
- US is considering a diesel export ban if Germany and France do not release fuel from reserves. American refineries are operating at approximately 97% capacity, and Washington acknowledges that the ban could increase gasoline prices.
Germany and France account for about 35% of the EU's strategic diesel reserves, estimated at 39 million tonnes—enough for over two months of consumption. Analysts estimate that an American ban would hit Latin America the hardest. The UN warns that global fuel subsidies could exceed $1 trillion.
Gas and LNG: Europe Enters Winter with Supply Shortages
The European gas market remains one of the most vulnerable segments of the energy sector. Prices at the TTF hub are holding around €73 per MWh, which is approximately double last year’s figures. EU underground storage is only filled to 71.5%—about 20 percentage points below the seasonal norm.
- Germany has instructed SEFE to inject an additional 8 TWh of gas into storage.
- The EU is considering a one-year postponement of methane regulations for imported gas to prevent constraints on LNG supplies.
- The head of Japan's JERA has warned that LNG prices have not yet reached their full growth potential.
- LNG imports to China have declined for the second consecutive month, while Pakistan is exploring direct purchases for power plants.
Long-term investments in the sector are accelerating, with ConocoPhillips signing a 20-year LNG contract with Venture Global, and Shell approving the second phase of LNG Canada, which will double the project’s export capacity.
Coal: Prices in China at Three-Year High
Coal is once again acting as a backstop resource for Asian energy systems. The benchmark price for thermal coal at Qinhuangdao port has risen for 11 consecutive weeks, reaching 986 yuan (approximately $147) per tonne— a three-year high. Since mid-July, prices have increased by 24% due to a decline in domestic production following safety inspections and a reduction in imports from Indonesia of around a quarter.
Coal accounts for nearly half of electricity generation in China, and authorities have urged mines to maintain stable production. In India, the IEA expects coal demand to rise by 4.2% this year, reaching 1.353 billion tonnes.
Electricity, Renewable Energy, and Nuclear Power
Global electricity demand is growing at the fastest rates in 15 years—driven by data centres, artificial intelligence, and electrification. The grids and generation are failing to keep up with consumption, particularly in developing markets.
- India: The electricity deficit in September reached 560 million kWh—the highest since August 2023. Nearly 40% of coal-fired plants are operating with critically low fuel reserves. Renewable energy generation increased by 25.1%, but its share in overall generation decreased to 17%.
- Nuclear Energy: Amazon has signed a 20-year agreement for the supply of nuclear power with Constellation, and uranium prices have reached an all-time high.
- Europe: Three EU countries have advocated for a new renewable energy target by 2040.
The energy crisis amplifies arguments in favour of renewable energy, storage solutions, and nuclear generation as tools for energy security, not just climate policy.
Asia: India and China Restructure Imports
India is increasing its purchases of Middle Eastern oil while reducing flows from Russia, with its refiners searching for tankers for voyages through the Strait of Hormuz. New Delhi underscores that high prices are driven by chaos in shipping, not shortages of crude. The rise in oil prices has already led to an outflow of $3.2 billion in foreign investments from Indian markets. Analysts have also lowered their forecasts for China’s oil imports in the fourth quarter by 400,000 barrels per day. Taiwan has allocated $13 billion to protect consumers from high energy costs.
Russia: Export Restrictions and the Domestic Fuel Market
The Russian oil products market remains under strict regulation. In addition to the diesel export ban for producers until the end of October, there is a gasoline export ban in effect until the end of January and restrictions on aviation fuel exports until November. Authorities explain these measures with high demand during the harvest season and the need to replenish stocks following drone attacks on refineries. Retail gasoline prices have increased by approximately 21% since the beginning of the year, and the anti-monopoly service is investigating dozens of independent filling station networks.
What Investors and Market Participants in the Energy Sector Should Watch For
- October 4: OPEC+ decision on November quotas and signals regarding 2027 parameters.
- October 7: Conclusion of the holidays in China and potential resumption of fuel exports.
- IEA and EU Reserves: Volume and timing of oil and diesel releases.
- US Decision regarding the diesel export ban and refinery margin responses.
- Strait of Hormuz: Shipping security and progress in US-Iran negotiations.
- Weather in Europe: Early cold spells with storage at 71.5% could sharply increase gas and electricity prices.
The baseline scenario for the coming days indicates continued high volatility: oil prices are reacting to news regarding reserves and the situation in Hormuz, while petroleum products, gas, and coal remain structurally deficient. For oil and fuel companies, this means high refining margins, while for consumers and importers, it signifies ongoing price pressures.
