Oil Market: Brent near $87, WTI around $82 — a week of declines
Oil prices are correcting after a two-week rally. On Thursday, Brent was trading near $87 per barrel, while WTI was around $82. The weekly decline for Brent exceeded 7%; however, the benchmark remains over 40% higher year-to-date: the geopolitical risk premium following the closure of the Strait of Hormuz in February has not disappeared. Key price drivers for oil today include:
- Diplomacy over Hormuz: Statements from Tehran and Muscat regarding a temporary shipping corridor and joint mine clearance represent the week's main bearish factor.
- Mild Sanctions: Washington has refrained from imposing secondary measures against Iran's trading partners, alleviating some concerns over supply reductions.
- Physical Flows: Donald Trump stated that 10 million barrels of oil passed through the strait on Tuesday, while Kpler recorded just five commercial vessels, as opposed to an average of 15 over ten days. The discrepancy in data is preventing traders from aggressive selling.
- Russian Risk: Reports regarding Moscow's preparations for escalation in Ukraine temporarily drove the market upward on Wednesday before news from Oman brought prices back down.
- Saudi Logistics: Satellite images indicate rising shipments from Saudi Aramco's terminals within the Persian Gulf — Riyadh is restructuring its exports amid threats from Houthis in the Red Sea.
MST Marquee analysts describe the market as being in "wait-and-see mode": following a series of broken ceasefires, investors are reluctant to play for de-escalation until there is confirmation of a deal between Tehran and Washington.
Strait of Hormuz: Iran-Oman Agreement and US Position
The key event of the week for the global oil and LNG market is the progress in negotiations between Iran and Oman. On Tuesday, the foreign ministers of both countries discussed a "preliminary framework" for the resumption of shipping, and on Wednesday, a representative of the IRGC announced that agreements had been reached. The main elements include:
- The establishment of a temporary joint shipping corridor through the strait.
- A joint project for the mine clearance of the waters.
- The division of the waters of the strait and revenues from transit between Iran and Oman.
- Negotiations for a permanent route within 30–60 days.
Tehran emphasizes that the agreement with Oman does not automatically mean the opening of the strait, and the IRGC directly accuses the US of delaying the process. The parties have missed the 60-day window set by a June memorandum, the formal mechanism for a ceasefire is closed, and now the Oman-Iran track is viewed as a prelude to a direct deal with Washington. A positive signal arises from reports of the US preparing to return diplomats to evacuated embassies in the Middle East. However, the negative aspect includes a tanker hit by an unknown projectile off the coast of Oman on 25 August: shipping safety has yet to be restored, and insurance rates remain prohibitively high.
“Economic Outcast” Sanctions: A Lighter Blow than the Market Anticipated
The campaign announced by US Treasury Secretary Scott Bessent, dubbed "economic D-Day," appears more as a signal than a devastating blow by Thursday. The Treasury has focused on Bank Melli, networks for smuggling oil, and "zero leakage" of foreign currency revenue, but has not imposed secondary sanctions against China, India, or Turkey. For the oil market, this means that approximately 340,000 barrels per day of Iranian exports to China remain intact for now. Within Iran, pressure is mounting: inflation is approaching 90%, and President Masoud Pezeshkian publicly states that the country "cannot fight forever," defending the June memorandum. This combination of economic exhaustion and a diplomatic window shapes investors' base scenario for the autumn — a gradual recovery of flows through Hormuz while maintaining high volatility.
US Stocks: Record Low Diesel and Record Refinery Utilisation
The EIA's weekly report for the period ending 21 August shows a modest increase in commercial oil stocks of only 0.1 million barrels, to 428.9 million — 1% higher than the five-year average. Utilisation of US refineries reached 97.4% capacity, processing 17.4 million barrels per day, with gasoline production rising to 9.8 million barrels per day and distillates falling to 5.1 million. Oil imports fell by 435,000 barrels per day, to 6.2 million. The main signal for the petroleum market: diesel fuel stocks in the US have dropped to the lowest seasonal level on record. Europe, facing shortages of middle distillates, has purchased diesel from Mexico for the first time in seven years. For fuel companies and traders, this signifies the continued record crack spreads for diesel at least until the end of autumn.
Gas and LNG: Europe between €65 and €100 per MWh
The gas market remains the most vulnerable segment of the global energy sector. TTF futures rose above €68/MWh on Tuesday — a peak since the beginning of 2023 — before retreating below €67 by Thursday on news from Oman. The fundamental picture remains unchanged:
- Storage: EU gas storage is filled to around 61% with a target of 80% by 1 November (down from 90%). Wood Mackenzie estimates the "best-case scenario" at 75% if Qatari exports fully recover by the end of September; if the strait remains closed for another two months — less than 70%.
- Price Forecasts: Goldman Sachs suggests that December TTF should exceed €100/MWh as Middle Eastern exports gradually normalise by 2027 — double the base forecast of €50. Morningstar sees a range of €90–120 during a cold winter.
- LNG Supply: New capacities in Qatar will not reach full load until the second half of 2027; from January 2027, the EU’s ban on Russian LNG will come into force. Europe may require approximately 64 billion cubic meters of US LNG.
- Asia: The spot JKM hovers around $21–22/MMBtu; Japan, Korea, and Taiwan are hedging risks with coal and the restart of nuclear power plants.
- US: Henry Hub is below $3/MMBtu with record production of ~122.5 billion cubic feet per day; scheduled maintenance at Corpus Christi LNG has temporarily reduced demand for feedstock.
OPEC+ and Russia: Paper Quotas and Declining Production
OPEC+ will meet on 6 September to decide on October; the base scenario is a pause in quota increases until the end of the year while maintaining around 2 million barrels per day of reductions from 2022, preparing for negotiations on quotas for 2027, where Iraq is seeking a higher level. Actual production from the alliance remains millions of barrels below February levels.
Russia is a clear illustration of the gap between quotas and actual production. According to secondary sources from OPEC, production in July fell to 8.89 million barrels per day — a six-year low and nearly 1 million below the permitted level. Refining in July dropped to 3.6 million barrels per day, the worst figure since 2002. Maritime oil exports over four weeks as of 23 August have decreased to 3.46 million barrels per day; strikes on Novorossiysk forced the redirection of Kazakh barrels to the Black Sea, freeing up Ust-Luga for Russian oil. The volume of Russian oil at sea fell to 83 million barrels — the lowest in a year, with export value dropping to $1.65 billion weekly. China and India remain the main buyers with deliveries of around 3.29 million barrels per day. Analysts estimate losses in Russian supply from strikes on infrastructure at 10%, while losses in petroleum products are significantly higher.
Russian Fuel Market: Diesel Export Fate Decided by 1 September
The internal fuel market in Russia remains manually controlled. The ban on gasoline exports remains in place until 31 January 2027, and for jet fuel until the end of November. The ban on diesel exports for producers expires on 1 September, and, according to industry sources, the government is leaning towards extending it at least until the end of September, with discussions even considering an extension until the end of the year. Deputy Prime Minister Alexander Novak has stated there are no problems with diesel logistics and that several refineries are returning from maintenance, however, in August, shortages have returned to certain regions after a brief respite. To fill the market, imports from Belarus and Asia are being utilised, along with a temporary reduction in the regulatory norm for exchange sales to 2%. For the global refined products market, this signifies the loss of Russian diesel volumes at the peak of European shortages.
Electricity, Renewables, and Coal: Energy Crisis Extends the Coal Era
The war in the Middle East has rewritten forecasts for electricity generation. The IEA expects coal generation in 2026 to reach around 10,974 TWh — nearly a third of global production at 33,313 TWh and 77% more than wind and solar combined. Gas generation, which was projected to grow by 1.3%, will remain at last year's level: expensive LNG has made coal more competitive in Europe and Asia. At the same time, the energy transition is accelerating where there are domestic resources:
- In the US, solar generation grew by 21% in the first half of the year, hydropower by 9%, and wind by 6%; together, wind and solar contributed 20% of production, surpassing coal and nuclear for the first time combined.
- Coal generation in the US dropped by 10% to 323 TWh, while coal exports are forecasted at 102 million short tons due to demand in Asia.
- Texas has halted the approval of new data centres, and the EIA has lowered its forecast for state load growth in 2027 from 14% to 6%.
- US tariffs on polysilicon and solar modules since 6 August have increased the cost of new renewable projects.
What to Watch on Friday, 28 August: Calendar for Energy Market Participants
- Washington's reaction to the Iran-Oman agreement and signals regarding the resumption of direct contacts.
- Kpler data on transit through the Strait of Hormuz and the investigation into the tanker attack.
- The Russian government's decision on diesel fuel exports post-1 September.
- Injection rates in EU storage facilities and the weekly close for TTF amid three-year highs.
- Baker Hughes rig count and US macro statistics affecting demand forecasts.
- The threat from Houthis to the Red Sea and the restructuring of Saudi export logistics.
- Preparations for the OPEC+ meeting on 6 September and signals indicating a pause in quota increases.
In summary for the week: the oil market is drifting towards a de-escalation scenario but remains a hostage to physical flows through Hormuz, where data from the White House and tracking companies diverges drastically. Gas and petroleum products — diesel in the US and Europe, LNG for EU storage — have become the main points of shortage in global energy for autumn 2026, while coal has received an unplanned reprieve in the energy transition. For daily analytics on oil, gas, renewables, and the energy market, follow the Open Oil Market channel on Telegram.
