Oil Market: Brent at $88 - Week of Decline After Two-Week Rally
Oil prices fluctuated widely throughout the week. On Monday, Brent dipped about 2.5%, falling toward $92 following the announcement of new U.S. sanctions against Iran. By Thursday, the price retreated to $88, and on Friday, the market closed the week with a moderate decline. The result was a drop of over 5% for Brent and approximately 4% for WTI over five sessions. Since the beginning of the year, the benchmark remains approximately 25-40% higher than pre-crisis levels, as the premium for geopolitical risk following the closure of the Strait of Hormuz in February has not dissipated. Key price drivers for oil include:
- Diplomacy over Hormuz: The agreement between Iran and Oman on a temporary corridor and joint demining is a major bearish factor.
- The Venezuelan Factor: Reports of negotiations between Caracas and Washington for U.S. companies' access to oil fields have strengthened expectations for an increase in supply.
- Hard Rhetoric: The White House's refusal to return to the terms of the June memorandum with Tehran temporarily drove the market upward (+2.1% for Brent during the session).
- Russian Risk: Strikes on Russian refineries and ports restrict oil and petroleum product exports, providing price support from below.
The EIA forecasts an average Brent price 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 stocks continue to decline: according to the IEA, observed reserves have fallen by 410 million barrels since the onset of war.
Venezuela and OPEC: A Blow to the Cartel's Unity
The main corporate-political news at the end of the week is that Venezuela, one of the five founding members of OPEC, is exploring plans to exit the organization. The topic is being discussed in contacts with American officials alongside negotiations regarding U.S. companies’ access to Venezuelan fields; no final decision has been made. The country's production in July was around 1.16 million barrels per day—half of what it was a decade ago—so the immediate effect on the oil market balance is limited. However, the symbolic significance is immense: following the recent exit of the UAE, another walkout raises questions about the cartel's cohesion ahead of the OPEC+ 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 the Iran-Oman Corridor
On Friday, six months had passed since the start of the war that closed this critical artery of the global energy market, through which around 20 million barrels per day of oil and petroleum products previously flowed. The current outline of the resolution is as follows:
- Iran and Oman have reached an agreement on a temporary shipping route: entry and part of the exit will pass through Iranian territorial waters.
- The parties have agreed to joint demining of the waters and revenue sharing from transit.
- Technical negotiations on a permanent corridor and future management of the strait will continue.
Tehran emphasizes that a complete opening of the strait is impossible without the U.S. fulfilling its obligations, and the IRGC directly accuses Washington of dragging its feet on the deal. President Trump states he is “in no rush,” while the U.S. Treasury prepares to demand G20 partners reduce ties with Iran under the 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 retreated from a 3.5-year high of €68.46 and ended the week around €65 per MWh on news of de-escalation. The fundamental situation is concerning:
- Storage: EU gas storage facilities are only about 61-63% full—among the lowest end-of-August levels in many years, compared to nearly 74% the previous year; the target level for November 1 has been lowered to 80%.
- Forecasts: In the event of a cold winter and slow recovery of Qatari exports, analysts anticipate December TTF prices exceeding €100/MWh.
- Asia: Spot LNG JKM remains around $21–22/MMBtu, and competition for Atlantic cargoes will intensify in the autumn.
- USA: Henry Hub remains below $3/MMBtu amid record production—American LNG is becoming the main resource to close Europe’s deficit.
Refined Products: Record Diesel Shortage in the Atlantic Basin
U.S. refineries are operating at about 97% capacity, but diesel fuel stocks in the U.S. have fallen to seasonal lows not seen in the history of observations. Europe, having lost Middle Eastern and some Russian volumes, has purchased diesel from Mexico for the first time in seven years. Crack spreads for middle distillates are at record levels—this is the main source of margin for refineries and fuel companies, while for consumers, it poses an inflation factor as the heating season approaches.
Russia: Falling Refining Rates and Diesel Export Fate
The domestic fuel market in Russia remains under manual control. The export ban on gasoline is in effect until January 31, 2027, and on aviation kerosene until the end of November. The embargo on the export of diesel fuel expires on September 1, and according to industry sources, authorities intend to extend it for at least the end of September; a variant through the end of the year is also under discussion. Reasons include the aftermath of drone attacks on refineries, a return to local shortages in several regions in August, and refining rates at their lowest in over two decades. For the global market of petroleum products, this means a drop in Russian diesel volumes at the peak of European shortages; inward, it involves importing fuel from Belarus and Asia as a safety measure.
Electricity, 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: it is estimated that coal generation in 2026 will account for nearly a third of global electricity production. At the same time, renewable energy is accelerating in regions with available resources: in the U.S., solar generation has increased by over 20% in the past six months, and wind and solar combined have outpaced coal and nuclear for the first time. Restraining factors include tariffs on solar modules and delays in approving new data centers in Texas, dampening forecasts for electricity demand growth.
Week's Calendar: What to Watch for Energy Market Participants
- OPEC+ meeting on September 6: decision on quotas for October and response to the Venezuelan walkout.
- Decision by the Russian government on diesel fuel exports after September 1.
- Progress in technical negotiations between Iran and Oman and the dynamics of transit through the Strait of Hormuz.
- Rate of gas injection into EU storage and TTF prices as summer ends.
- Signals from Washington regarding Venezuelan fields and sanction pressure on Iran via the G20.
Conclusion
The oil market is drifting toward 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 deficiency for the global energy sector in autumn 2026, while coal has received an unexpected reprieve in the energy transition. For investors and energy companies, the coming week—with the OPEC+ meeting and Moscow's decision on diesel—will be pivotal for positioning ahead of the fourth quarter.
