Oil Market: Brent Balances Around the $100 Mark
Oil prices are closing the week with high volatility. On Friday, Brent dropped by approximately 2.5%, falling to just below $100 per barrel, while WTI lost nearly 4%, dropping to $89. The day before, Brent was holding above $102. Despite this correction, oil remains about 1.5 times more expensive than it was a year ago.
Prices are being influenced by a combination of factors:
- Reserves: The European Commission is discussing the timing of a new coordinated release of strategic reserves with participants of the IEA.
- Export Recovery: Non-Iranian oil shipments through the Strait of Hormuz, as of late September, have returned to pre-war levels of 13.5 million barrels per day, according to tracking data, thanks to convoyed ship passage.
- Security Risks: This week, three tankers in the strait were hit by unidentified projectiles, and negotiations between the U.S. and Iran have made no progress.
- Stocks: According to the U.S. Department of Energy, global oil reserves have decreased by about 400 million barrels since the beginning of the year.
OPEC+: Meeting on October 4 and Quota Issues for 2027
On Sunday, October 4, seven key OPEC+ members — Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman — will hold their monthly meeting. According to sources, the quotas for November are expected to remain unchanged. Formal target levels have long diverged from reality: actual production by the alliance is approximately 5 million barrels per day below pre-war levels, as Gulf countries are unable to fully export crudes.
The main intrigue shifts toward 2027: the alliance is completing an audit of production capacities, which will inform the establishment of new baseline production levels. For oil companies and investors, this represents a question of long-term market share distribution.
Petroleum Products and Refineries: Diesel Becomes the Major Shortage
The market for petroleum products is currently tighter than that for crude oil. Diesel fuel is hitting price records in many countries, with the U.S. exceeding $6 per gallon. In just a few days, supply has decreased across several fronts:
- China has suspended exports of gasoline, diesel, and jet fuel for October, except for shipments to Hong Kong and Macau. Domestic fuel reserves have dropped to multi-year lows, with a decision on resumption expected after the holidays ending on October 7.
- Russia has extended the ban on diesel exports for producers until October 31.
- India: An explosion at a major export-oriented refinery has led to the cancellation of part of the tenders.
- USA is considering a ban on diesel exports if Germany and France do not release fuel from reserves. American refineries are operating at about 97% capacity, and Washington acknowledges that the ban could increase gasoline prices.
Germany and France account for approximately 35% of the EU's strategic diesel reserves, estimated at 39 million tons — enough for more than two months of consumption. Analysts predict that an American ban would hit Latin America the hardest. The UN warns that global fuel subsidies may exceed $1 trillion.
Gas and LNG: Europe Enters Winter with a Supply Shortage
The European gas market remains one of the most vulnerable segments of the energy sector. Prices at the TTF hub are around €73 per MWh, which is about twice last year's levels. EU underground storage is only 71.5% full — around 20 percentage points below the seasonal norm.
- Germany has tasked SEFE with adding an additional 8 TWh of gas to storage.
- The EU is considering a one-year deferment of methane regulations for imported gas to avoid limiting LNG supplies.
- The head of Japan's JERA has warned that LNG prices have not yet reached their growth potential.
- LNG imports to China have declined for the second month in a row, while Pakistan is exploring direct purchases for power plants.
long-term investments in the sector are accelerating: ConocoPhillips has signed a 20-year LNG contract with Venture Global, and Shell has approved the second phase of LNG Canada, which will double the project’s export capacity.
Coal: Prices in China Hit Three-Year High
Coal is once again serving as a backup resource for Asia's energy systems. The benchmark price for thermal coal at Qinhuangdao port has risen for 11 consecutive weeks, reaching 986 yuan (about $147) per ton — the highest level in three years. Since mid-July, prices have increased by 24% due to a decline in domestic production following safety inspections and a roughly 25% reduction in imports from Indonesia.
Coal accounts for nearly half of electricity generation in China, and authorities have urged mines to maintain stable production. In India, the IEA forecasts a 4.2% increase in coal demand this year, reaching 1.353 billion tons.
Electricity, Renewables, and Nuclear Energy
Global electricity demand is growing at its highest rate in 15 years, driven by data centers, artificial intelligence, and electrification. Supply and generation are struggling to keep pace with consumption, particularly in emerging markets.
- India: Electricity deficit in September reached 560 million kWh — the highest since August 2023. Nearly 40% of coal plants are operating at critically low fuel levels. Renewable energy output increased by 25.1%, but its share in generation has dropped to 17%.
- Nuclear Energy: Amazon has signed a 20-year agreement for nuclear power supply with Constellation, while uranium prices have hit a historical high.
- Europe: Three EU countries have advocated for a new renewable energy target by 2040.
The energy crisis reinforces arguments in favor of renewables, storage solutions, and nuclear generation as tools for energy security, rather than solely climate policy.
Asia: India and China Reshape Imports
India is increasing purchases of Middle Eastern oil while reducing Russian supplies, with its refiners seeking tankers for voyages through Hormuz. New Delhi emphasizes that high prices are due to chaos in shipping, not a shortage of crude. The rise in oil prices has already led to an outflow of $3.2 billion in foreign investments from Indian markets. Analysts have also downgraded their oil import forecast for China in the fourth quarter by 400,000 barrels per day. Taiwan has allocated $13 billion to protect consumers from high energy costs.
Russia: Export Restrictions and Domestic Fuel Market
The Russian market for petroleum products remains under strict regulation. In addition to the ban on diesel exports for producers until the end of October, there is a ban on gasoline exports until the end of January and restrictions on jet fuel exports until November. Authorities justify these measures by high demand during the harvest period and the need to replenish stocks following drone attacks on refineries. Retail gasoline prices have risen by approximately 21% since the beginning of the year, and the antimonopoly service is investigating dozens of independent gas station networks.
What to Watch for Investors and Energy Market Participants
- October 4: OPEC+ decision on November quotas and signals regarding the parameters for 2027.
- October 7: End of holidays in China and possible resumption of fuel exports.
- IEA and EU Reserves: Volume and timing of oil and diesel releases.
- U.S. Decision on the ban on diesel exports and refinery margin reactions.
- Strait of Hormuz: Shipping security and status of U.S.-Iran negotiations.
- Weather in Europe: Early cold weather with storage at 71.5% could sharply increase gas and electricity prices.
The baseline scenario for the coming days is the continuation of high volatility: oil reacts to news regarding reserves and Hormuz, while petroleum products, gas, and coal remain structurally undersupplied. For oil and fuel companies, this means high refining margins; for consumers and importers, it signals ongoing price pressure.
