Oil Market: Brent Around $87, WTI Around $82 — A Week of Decline
Oil prices are correcting after a two-week rally. Brent traded near $87 per barrel on Thursday, while WTI hovered around $82. The weekly decline of Brent exceeded 7%, yet since the beginning of the year, the benchmark is still over 40% more expensive: the geopolitical risk premium following the closure of the Strait of Hormuz in February has not disappeared. Today's key price drivers for oil are:
- Diplomacy Over Hormuz: Statements from Tehran and Muscat regarding a temporary shipping corridor and joint demining are the primary bearish factor of the week.
- Soft Sanctions: Washington has refrained from imposing secondary measures against Iran's trading partners, alleviating some concerns about a reduction in supply.
- Physical Flows: Donald Trump announced the passage of 10 million barrels of oil through the strait on Tuesday, whereas Kpler recorded only five commercial vessels compared to an average of 15 over ten days. The discrepancy in data is keeping traders from aggressive selling.
- Russian Risk: Reports of Moscow preparing for escalation in Ukraine briefly turned the market upward on Wednesday before news from Oman pushed prices back down.
- Saudi Logistics: Satellite imagery indicates a rise in shipments from Saudi Aramco from terminals in the Persian Gulf — Riyadh is restructuring exports amidst threats from Houthi forces in the Red Sea.
Analysts at MST Marquee describe the market as being in a "waiting mode": Following a series of failed ceasefires, investors are cautious to play the de-escalation scenario without confirmation of a deal between Tehran and Washington.
Strait of Hormuz: Iran-Oman Agreement and the U.S. 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 the two countries discussed a "preliminary framework" for resuming shipping, and on Wednesday, a representative of the IRGC announced agreements reached. The main elements are:
- Establishment of a temporary joint shipping corridor through the strait.
- A joint project for demining the waters.
- Division of the waters of the strait and revenues from transit between Iran and Oman.
- Negotiations on a permanent route within 30-60 days.
Tehran emphasizes that the agreement with Oman does not automatically entail the opening of the strait, and the IRGC directly accuses the U.S. of dragging out the process. The parties missed the 60-day window set by the June memorandum, the formal ceasefire mechanism is closed, and now the Oman-Iran track is viewed as a prelude to a direct deal with Washington. A positive signal is the reports of the U.S. preparing to return diplomats to evacuated embassies in the Middle East. A negative one is the tanker struck by an unknown projectile off the coast of Oman on 25 August: maritime security has not been restored, and insurance rates remain prohibitive.
Sanctions "Economic Outcast": Impact Weaker Than Market Feared
The campaign announced by U.S. Treasury Secretary Scott Bessent, referred to as "economic D-Day," appears more as a signal than a devastating blow as of Thursday. The Treasury focused on Bank Melli, networks of oil smuggling, and "zero leak" of foreign currency earnings but did not impose 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 are still intact. Within Iran, pressure is mounting: inflation is nearing 90%, and President Masoud Pezeshkian has publicly stated that the country "cannot fight forever," defending the June memorandum. This combination of economic strife and diplomatic openings shapes the baseline scenario for investors this autumn — a gradual restoration of flows through Hormuz amid persistent volatility.
U.S. Stocks: Record Low Diesel and Record Refinery Utilization
The weekly EIA report for the period ending 21 August showed a modest increase in commercial crude oil stocks of only 0.1 million barrels, reaching 428.9 million — 1% above the five-year average. U.S. refinery utilization has reached 97.4% capacity, processing 17.4 million barrels per day, with gasoline output rising to 9.8 million barrels per day, while distillates fell to 5.1 million. Crude oil imports decreased by 435,000 barrels per day to 6.2 million. The main signal for the refined products market is that diesel fuel stocks in the U.S. have dropped to the lowest seasonal levels on record. Europe, facing a shortage of middle distillates, has purchased diesel from Mexico for the first time in seven years. This indicates that fuel companies and traders can expect record crack spreads for diesel to persist 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 landscape. TTF futures surpassed €68/MWh on Tuesday — the highest since early 2023 — but retreated below €67 by Thursday due to news from Oman. The fundamental picture remains unchanged:
- Storage: EU underground gas storage is only around 61% full, 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, it could drop below 70%.
- Price Forecasts: Goldman Sachs predicts that December TTF prices could surpass €100/MWh as Middle Eastern exports gradually normalize by 2027 — double the baseline forecast of €50. Morningstar sees a range of €90–120 in the event of a cold winter.
- LNG Supply: new Qatari facilities will not reach full utilization until at least the second half of 2027; the EU's ban on Russian LNG goes into effect in January 2027. Europe may require about 64 billion cubic meters of U.S. LNG.
- Asia: spot JKM remains around $21–22/MMBtu; Japan, Korea, and Taiwan are hedging risks with coal and the restart of nuclear power plants.
- U.S.: Henry Hub is below $3/MMBtu amid record production of ~122.5 billion cubic feet per day; scheduled maintenance at Corpus Christi LNG has temporarily reduced feedstock demand.
OPEC+ and Russia: Paper Quotas and Declining Production
OPEC+ will convene on 6 September to decide on October production levels; the baseline scenario suggests a pause in quota increases until the end of the year while maintaining around 2 million barrels per day of cuts from 2022 and preparing for negotiations on quotas for 2027, where Iraq seeks a higher level. The actual production of the alliance remains millions of barrels below February figures.
Russia exemplifies the gap between quotas and reality. According to secondary sources cited by OPEC, production fell to 8.89 million barrels per day in July — the lowest in six years 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 the four weeks ending 23 August declined to 3.46 million barrels per day; strikes on Novorossiysk forced the rerouting of Kazakh barrels to the Black Sea, freeing up Ust-Luga for Russian shipments. The volume of Russian oil at sea has fallen to 83 million barrels — the lowest in a year — and export values dropped to $1.65 billion per week. China and India remain the main buyers, with shipments around 3.29 million barrels per day. Analysts estimate that losses to Russian supply from strikes on infrastructure could reach 10%, with losses for petroleum products significantly higher.
Russian Oil Products Market: Diesel Export Fate to Be Decided by 1 September
Russia's domestic fuel market remains under manual control. The ban on gasoline exports is in effect until 31 January 2027, and for aviation fuel until the end of November. The restriction on diesel exports for producers expires on 1 September, and according to industry sources, the government is leaning towards an extension at least until the end of September, with discussions considering an extension until the end of the year. Deputy Prime Minister Alexander Novak stated that there are no issues with diesel logistics and that several refineries are returning from maintenance; however, in August, shortages returned to certain regions after a brief lull. Market replenishment is managed through imports from Belarus and Asia, along with a temporary reduction in trading standards to 2%. For the global refined products market, this means a loss of Russian diesel volumes at a peak European deficit.
Electricity, Renewables, and Coal: Energy Crisis Extends the Era of Coal
The conflict in the Middle East has rewritten forecasts for the electricity sector. The IEA expects coal generation in 2026 to reach about 10,974 TWh — nearly a third of global production of 33,313 TWh and 77% more than wind and solar combined. Gas generation, which was anticipated to grow by 1.3%, will remain at last year's levels: expensive LNG has made coal more competitively viable in Europe and Asia. Concurrently, the energy transition is accelerating in regions with domestic resources:
- In the U.S., solar generation increased by 21% in the first half of the year, hydro by 9%, and wind by 6%; wind and solar combined accounted for 20% of generation, surpassing both coal and nuclear for the first time.
- Coal generation in the U.S. fell by 10% to 323 TWh, while coal exports are forecasted to reach 102 million short tons due to demand from Asia.
- Texas has suspended approvals for new data centers, and the EIA has lowered its forecast for the state's load growth in 2027 from 14% to 6%.
- U.S. tariffs on polysilicon and solar modules from 6 August are increasing the costs 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 investigations into the attack on the tanker.
- The Russian government's decision on diesel fuel exports after 1 September.
- Injection rates in Europe's underground gas storage and the weekly close for TTF amidst three-year highs.
- Baker Hughes rig count and U.S. macrostatistical data affecting demand forecasts.
- Threats from Houthi forces to the Red Sea and the restructuring of Saudi export logistics.
- Preparation for the OPEC+ meeting on 6 September and signals about a pause in quota increases.
Week's summary: The oil market drifts toward a de-escalation scenario but remains hostage to physical flows through Hormuz, where data from the White House and tracking companies diverge significantly. Gas and refined products — diesel in the U.S. and Europe, LNG for EU storage — have become the main points of shortage in the global energy landscape for autumn 2026, while coal has received an unplanned reprieve in the energy transition. For daily analysis on oil, gas, renewables, and the energy market, check out the Open Oil Market Telegram channel.
