Oil Market: Brent at $88 – A Week of Decline After Two-Week Rally
Oil prices experienced a volatile week. On Monday, Brent declined by about 2.5%, dropping towards $92 in response to the announcement of new U.S. sanctions against Iran. By Thursday, the price has retreated to $88, and Friday saw the market close the week with moderate declines. The result was a fall of over 5% in Brent and approximately 4% in WTI over five sessions. Since the beginning of the year, the benchmark remains approximately 25–40% higher than pre-crisis levels: the geopolitical risk premium following the closure of the Strait of Hormuz in February has not dissipated. Key drivers of oil prices include:
- Diplomacy Over Hormuz: The agreement between Iran and Oman on a temporary corridor and joint demining acts as a primary bearish factor.
- The Venezuelan Factor: Reports of negotiations between Caracas and Washington regarding U.S. companies accessing oil fields have heightened expectations of supply growth.
- Tight Rhetoric: The White House's refusal to revert to the terms of the June memorandum with Tehran briefly propelled the market upward (+2.1% in Brent during the session).
- Russian Risk: Strikes on refineries and ports in Russia restrict exports of oil and petroleum products, providing support to prices 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 inventories continue to decline: according to the IEA, observable reserves have dropped by 410 million barrels since the onset of the war.
Venezuela and OPEC: A Blow to the Unity of the Cartel
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. This topic is being discussed in contacts with U.S. officials alongside negotiations regarding U.S. companies' access to Venezuelan fields; no final decision has been reached. The country’s production in July stood at around 1.16 million barrels per day—half of what it was a decade ago—so the direct impact on the oil market balance is limited. However, the symbolic significance is enormous: following the recent exit of the UAE, another defection calls into question the cohesion of the cartel ahead of the OPEC+ meeting on September 6, where the base 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, it marked six months since the onset of the war that has closed this key artery of the global energy market, through which approximately 20 million barrels per day of oil and petroleum products previously flowed. The current framework for resolution looks as follows:
- Iran and Oman have agreed on a temporary shipping route: entrance and part of the exit will occur through Iranian territorial waters.
- The parties have agreed on joint demining of the water area and revenue-sharing from transit.
- Technical negotiations on a permanent corridor and future management of the strait will continue.
Tehran emphasizes that full reopening of the strait is impossible without the U.S. fulfilling its obligations, while the IRGC directly accuses Washington of dragging out the deal. President Trump states that he is "in no hurry," and the U.S. Treasury is preparing to demand that G20 partners reduce ties with Iran under the threat of being disconnected from the dollar system. For the energy sector, this signifies a continued high volatility: physical flows are slowly recovering, and insurance rates remain prohibitive.
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 retreated from a 3.5-year high of €68.46 and finished the week around €65 per MWh amid news of de-escalation. The fundamentals raise concerns:
- Storage: EU gas storage facilities are only filled to approximately 61–63%—the lowest for late August in many years compared to nearly 74% a year earlier; 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 a December TTF above €100/MWh.
- Asia: spot LNG JKM remains around $21–22/MMBtu, and competition for Atlantic cargoes will intensify in the fall.
- U.S.: Henry Hub remains below $3/MMBtu with record production—American LNG is becoming the key resource to close the European deficit.
Petroleum Products: Record Diesel Deficit in the Atlantic Basin
U.S. refineries are operating at about 97% capacity, but diesel stocks in the U.S. have fallen to seasonal minimums not seen in recorded history. Europe, having lost Middle Eastern and some Russian volumes, has for the first time in seven years turned to Mexico for diesel imports. Crack spreads on mid-distillates remain at record levels—this is a primary source of margin for refineries and fuel companies, while for consumers, it represents an inflationary factor on the brink of the heating season.
Russia: Falling Refining and the Fate of Diesel Exports
The domestic fuel market in Russia remains under manual control. The ban on gasoline exports is in place until January 31, 2027, and on jet fuel until the end of November. The embargo on diesel fuel exports expires on September 1, and according to industry sources, authorities intend to extend it at least until the end of September; a discussion is also underway about extending it until the end of the year. Reasons include the aftermath of drone attacks on refineries, a localized deficit in several regions that returned in August, and refining levels at two-decade lows. For the global market of petroleum products, this means a significant drop in Russian diesel volumes at the peak of European shortages; for the domestic market, imports of fuel from Belarus and Asia are being considered as a safety net.
Electricity, Renewables, and Coal: Crisis Extends the Era of Coal
The energy crisis has rewritten the trajectory of the energy transition. High LNG prices have made coal more competitive in Europe and Asia: estimates suggest that coal generation will account for nearly a third of global electricity production in 2026. Simultaneously, renewable energy is accelerating where there are indigenous resources: in the U.S., solar generation has grown by more than 20% over the first half of the year, and for the first time, wind and solar combined have outpaced coal and nuclear together. However, restraining factors include tariffs on solar modules and a pause in the coordination of new data centers in Texas, dampening forecasts for electricity demand growth.
This Week’s Calendar: What Energy Market Participants Should Watch
- OPEC+ meeting on September 6: decision on October quotas and response to Venezuela's defection.
- Decision from the Russian government on diesel fuel exports after September 1.
- Progress of technical negotiations between Iran and Oman and dynamics of transit through the Strait of Hormuz.
- Pacing of gas injections into European storage and TTF quotes as summer draws to a close.
- Signals from Washington regarding Venezuelan fields and sanctions pressure on Iran through 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 deficit in the global energy market heading into fall 2026, while coal has received an unplanned extension in the energy transition. For investors and energy companies, the upcoming week—with the OPEC+ meeting and the decision from Moscow on diesel—will be pivotal for positioning in the fourth quarter.
