Oil Market: Brent at $88 – Week Ends with Over 5% Decline
Oil prices are adjusting after a two-week rally. Brent traded near $88 per barrel on Friday, while WTI hovered around $82–83. The weekly decline in Brent exceeded 5%, and WTI lost over 4%, yet since the beginning of the year, the North Sea benchmark remains about 30% higher year-on-year: the premium for geopolitical risk after the closure of the Strait of Hormuz in February persists. Key drivers of oil prices heading into the weekend include:
- Diplomacy Regarding Hormuz: The Iran-Oman agreement on the division of control and revenue from transit through the strait remains the main bearish factor of the week, although Tehran emphasizes there will be no immediate reopening of shipping.
- Washington's Tough Stance: On Friday, prices briefly turned upwards on reports that the US is excluding a return to the terms of the June peace memorandum with Iran—the market recognized that a final deal will be delayed.
- Russian Risk: Statements from Vladimir Putin about the ineffectiveness of negotiations with Ukraine and preparations for an escalation of hostilities, alongside ongoing strikes on Russian refineries and ports, limit Russia's export potential and support prices from below.
- Gulf Logistics: Saudi Arabia is ramping up shipments from terminals within the Gulf, restructuring export routes due to threats from Houthi forces to shipping in the Red Sea.
Venezuela and OPEC: Founding Member on the Brink of Historic Exit
The main corporate-political news at the end of the week is reports that Caracas is seriously considering leaving OPEC. The topic is under discussion in negotiations with US officials, with no final decision made yet. The context makes this narrative strategic for the global oil market:
- Venezuela is one of the five countries that founded OPEC in 1960 and possesses the largest proven oil reserves in the world, with current production only around 1–1.2 million barrels per day.
- The US is discussing long-term agreements for American companies to access Venezuelan fields; some officials view the Washington-Caracas alliance as a counterbalance to OPEC's influence.
- This is the second potential exit in a year: the UAE left OPEC and OPEC+ on May 1, 2026, and Iraq publicly expressed dissatisfaction with quotas over the summer.
- Increased Venezuelan production through US investments would add a new source of supply to the market over several years—this is a pressure factor on long-term prices.
For investors, the scenario of a "Vexit" is primarily a question of the cartel's manageability: further fragmentation of OPEC+ increases the risk of a market share struggle reminiscent of 2020. An intermediate milestone is the alliance meeting on September 6, where the baseline scenario remains a pause in quota increases until the end of the year.
Strait of Hormuz: Six Months of Crisis and a Fragile Diplomatic Window
Friday, August 28, symbolizes exactly six months since the start of the US and Israeli military operation against Iran and the subsequent closure of the Strait of Hormuz, through which about 20% of the world’s oil trade and nearly one-fifth of LNG passed before the war. The current status of this key artery in global energy:
- Iran and Oman have agreed on the routes: inbound traffic will go through the northern corridor in Iranian waters, and outbound through the southern corridor in Omani waters, along with a revenue-sharing agreement and joint demining of the aquatic area.
- Tehran insists that the agreement with Muscat does not mean an automatic reopening of the strait until the US fulfills its commitments; traffic remains significantly below pre-war levels of approximately 130 vessels per day.
- Maritime safety has not been restored: an attack on a tanker off the Omani coast on August 25 keeps insurance rates at prohibitive levels.
- US Treasury Secretary Scott Bessent is preparing to demand that G20 partners reduce ties with Iran under the threat of limiting access to the dollar system—the sanctions pressure is shifting towards the financial sphere.
Gas and LNG: Europe Enters Autumn with Lowest Stocks Since 2009
The gas market remains the most vulnerable segment of the global energy industry. TTF futures rose above €68/MWh at the beginning of the week—a high since early 2023—and retreated to around €65–67 by Friday on news of diplomatic progress. The fundamental picture is concerning:
- Storage: EU underground gas storages are only about 63% full—this is the lowest for the end of August since 2009—with a target level of 80% by November 1, down from previous estimates of 90%.
- Qatar: During the six months of blockade, the world's second-largest LNG exporter lost about $24 billion in revenue, with shipments in certain periods dropping by 96%—an unprecedented supply shock.
- Price Projections: If Middle Eastern exports normalize slowly, December TTF might exceed €100/MWh—twice the base estimates from the beginning of the year.
- Regulatory Factor: The EU ban on Russian pipeline gas and LNG has been in effect since March 2026 with transitional periods, which narrows the room for maneuver amid shortages.
- Market Divergence: Asian JKM holds around $21–22/MMBtu while the American Henry Hub is below $3/MMBtu despite record production: this spread fuels interest in new US LNG export projects.
Oil Products: Record Low Diesel in the US and Record Refinery Utilization
The latest EIA report recorded US refinery utilization at 97.4% capacity—processing reached 17.4 million barrels per day, and commercial oil inventories showed nearly no change (428.9 million barrels). The main signal for the oil products market: diesel supplies in the US have dropped to the lowest seasonal levels in history. Europe, facing a shortage of middle distillates after losing Russian and Middle Eastern volumes, has purchased diesel from Mexico for the first time in seven years. For fuel companies and traders, this means that record crack spreads for diesel will likely persist until at least the end of autumn—and the market's sensitivity to any news regarding the state of refineries on both sides of the Atlantic will be heightened.
Russia: Fate of Diesel Exports Decided This Weekend
The domestic fuel market in Russia remains under manual control, and the upcoming days will be decisive. The current ban on diesel fuel exports for manufacturers expires on September 1; according to industry sources, the government is leaning towards extending it at least until the end of September, with discussions including a variant lasting until the end of 2026. A complete ban on gasoline exports is in place until January 31, 2027, with restrictions also affecting jet fuel. Deputy Prime Minister Alexander Novak states that there is no diesel shortage and that several refineries are returning from maintenance; however, drone strikes on processing infrastructure continue to limit production: processing over the summer dropped to two-decade lows, and production in July was about 8.9 million barrels per day—the lowest in six years. For the global market, this means a drop in Russian diesel volumes at a time when European middle distillate shortages peak.
Electricity, Renewable Energy, and Coal: Energy Crisis Extends the Era of Coal, but Energy Transition Accelerates
Expensive LNG has rewritten the balance of global electricity: coal has received an unplanned reprieve and remains the largest single source of generation, providing about one-third of global output. Meanwhile, the combined share of renewable sources—solar, wind, hydro, and bioenergy—is forecasted by the IEA to surpass coal for the first time in 2026. The regional landscape is contrasting:
- In the US, solar generation grew by 21% in the first half of the year, wind and solar together accounted for around 20% of output, while coal generation fell by approximately 11% thanks to cheap gas.
- Texas has halted the approval of new data centers, leading the EIA to reduce its forecast for the state's energy consumption growth in 2027 from 14% to 6%—the first notable signal of cooling AI load on the grids.
- In Europe and Asia, expensive LNG is making coal more competitive with gas in power generation, sustaining demand for thermal coal from exporters—Indonesia, Australia, and South Africa.
Macroeconomics: Jackson Hole and Interest Rates as a Factor of Energy Demand
Additional guidance for commodity markets will come from the speech of the Fed Chairman Kevin Warsh at the Jackson Hole symposium on Friday. Signals regarding the trajectory of interest rates directly influence the dollar's exchange rate, the cost of financing energy projects, and forecasts for oil and gas demand. A softer rhetorical stance would support commodity prices, whereas a hard tone could intensify pressure on oil, which is already declining on diplomatic news.
What to Watch Over the Weekend and Next Week: Calendar for Energy Market Participants
- The official response from Caracas and OPEC regarding reports of Venezuela's possible exit from the cartel.
- The Russian government's decision on diesel fuel exports before the expiration of the ban on September 1.
- Data on actual transit through the Strait of Hormuz and the fate of the Iranian-Omani corridor.
- Gas injection rates in European underground storages and TTF dynamics following the retreat from three-year highs.
- OPEC+ meeting on September 6: pause in quota increases and discussions on parameters for 2027.
- Escalation risks along the Russia-Ukraine line and the state of Russian oil refining.
- The repercussions of the Fed Chairman's speech in Jackson Hole for the dollar and commodity markets.
The conclusion of the week: the oil market is drifting towards a scenario of de-escalation in the Middle East but remains hostage to physical flows through the Strait of Hormuz and increasing uncertainty within OPEC itself, where Venezuela is now contemplating an exit following the UAE's departure. Gas and diesel are the main points of shortage in the global energy sector for autumn 2026: Europe enters the heating season with the lowest stocks in 17 years, while coal receives an extension in its era, despite the accelerating energy transition. Daily analysis on oil, gas, renewable energy, and the energy market can be found in the Telegram channel Open Oil Market.
