Oil Market: Brent at $88 – Week Ends with Over 5% Decline
Oil prices are correcting after a two-week rally. Brent traded near $88 per barrel on Friday, while WTI was around $82–83. The weekly decline for Brent exceeded 5%, and WTI lost more than 4%. However, since the beginning of the year, the North Sea benchmark remains about 30% higher year-over-year, with the premium for geopolitical risk after the closure of the Strait of Hormuz in February still intact. Key drivers of oil prices heading into the weekend:
- Hormuz Diplomacy: The agreement between Iran and Oman regarding the division of control and revenues from transit through the strait remains the main bearish factor of the week, although Tehran emphasizes that an immediate reopening of shipping is not forthcoming.
- Washington's Stance: On Friday, prices briefly turned upward on news that the U.S. is ruling out a return to the terms of the June peace memorandum with Iran—the market interprets this as a delay in finalizing a deal.
- Russian Risk: Statements from Vladimir Putin regarding the ineffectiveness of negotiations with Ukraine and preparations for intensifying hostilities, alongside ongoing attacks on Russian refineries and ports, limit Russia's export potential and support prices from below.
- Gulf Logistics: Saudi Arabia is increasing shipments from terminals in the Gulf, restructuring export routes due to threats from Houthis 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. This topic is under discussion in negotiations with U.S. officials, but a final decision has not yet been made. The context makes this story 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, currently producing only about 1–1.2 million barrels per day.
- The U.S. is discussing long-term agreements for American companies to access Venezuelan oil fields; some officials see the Washington-Caracas alliance as a counterbalance to OPEC's influence.
- This marks 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 U.S. investments would add a new supply source to the market over the next few years—a factor that could pressure long-term prices.
For investors, the "Vexit" scenario is primarily a question of the cartel's manageability: further fragmentation of OPEC+ raises the risk of market-share battles reminiscent of 2020. The interim benchmark will be 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 Fragile Diplomatic Window
Friday, August 28, marks a symbolic date—exactly six months since the start of the U.S. and Israeli military operations against Iran and the subsequent closure of the Strait of Hormuz, through which about 20% of global oil trade and nearly one-fifth of LNG used to flow before the war. The current status of this key artery of global energy is as follows:
- Iran and Oman have agreed on routing coordinates: inbound traffic—through the northern corridor in Iranian waters, outbound—via the southern corridor in Omani waters, as well as the division of transit revenues and joint demining of the waters.
- Tehran insists that the agreement with Muscat does not mean automatic reopening of the strait until the U.S. fulfills its obligations; traffic remains significantly below pre-war levels of approximately 130 vessels per day.
- Shipping security has not been restored: the attack on a tanker off the coast of Oman on August 25 keeps insurance rates at prohibitive levels.
- U.S. Treasury Secretary Scott Bessent is preparing to demand G20 partners reduce ties with Iran under the threat of restrictions on access to the dollar system—sanction pressure is shifting to the financial dimension.
Gas and LNG: Europe Enters Autumn with Lowest Stock Levels Since 2009
The gas market remains the most vulnerable segment of global energy. TTF futures rose above €68/MWh at the beginning of the week—marking a peak since early 2023—but retreated to around €65–67 by Friday on news of diplomatic progress. The fundamental picture is concerning:
- Storage: EU gas storage is only about 63% full—the lowest for the end of August since 2009—well below the target level of 80% by November 1, which has been reduced from the previous 90%.
- Qatar: After six months of blockade, the world's second-largest LNG exporter has lost approximately $24 billion in revenue, with shipments falling by up to 96% during certain periods—an unprecedented supply shock.
- Price Forecasts: With slow normalization of Middle Eastern exports, December TTF could exceed €100/MWh—double the baseline estimates at the beginning of the year.
- Regulatory Factor: The EU ban on Russian pipeline gas and LNG has been in place since March 2026, with transition periods, narrowing maneuvering space amid shortages.
- Market Divergence: The Asian JKM is holding at $21–22/MMBtu, while the American Henry Hub is below $3/MMBtu amidst record production—a spread that fuels interest in new U.S. LNG export projects.
Refined Products: Record Low Diesel in the U.S. and Record Refinery Utilization
A recent EIA report documented U.S. refinery utilization at 97.4% of capacity—processing reached 17.4 million barrels per day, while commercial crude oil inventories remained virtually unchanged (428.9 million barrels). The main signal for the refined products market is that diesel fuel reserves in the U.S. have dropped to the lowest seasonal level on record. Europe, facing shortages of middle distillates after losing Russian and Middle Eastern volumes, has imported diesel from Mexico for the first time in seven years. For fuel companies and traders, this means that record diesel crack spreads will remain in place at least until the end of autumn, with heightened market sensitivity to news regarding the status of refineries on both sides of the Atlantic.
Russia: Diesel Export Fate Decided Over the Weekend
The domestic fuel market in Russia remains in manual control mode, and the coming days will be crucial. The current export ban on diesel fuel for producers expires on September 1; according to industry sources, the government is leaning towards extending this ban at least until the end of September, with discussions also considering an extension until the end of 2026. A complete ban on gasoline exports is in effect until January 31, 2027, with restrictions also affecting jet fuel. Deputy Prime Minister Alexander Novak has stated there is no diesel shortage and that several refineries are returning from maintenance, yet drone strikes on processing infrastructure continue to limit production: refining dropped to summer lows not seen in over two decades, and production in July—around 8.9 million barrels per day—was the lowest in six years. For the global market, this translates to a decline in Russian diesel volumes amid peak European shortages of middle distillates.
Electric Power, Renewables, and Coal: Energy Crisis Extends the Era of Coal, but Energy Transition Accelerates
Expensive LNG has rewritten the balance of global electricity generation: coal has received an unexpected reprieve and remains the largest single source of generation, accounting for about one-third of global output. Meanwhile, the combined share of renewable sources—solar, wind, hydro, and bioenergy—is expected to surpass coal for the first time in 2026, according to the IEA forecasts. The regional picture contrasts sharply:
- In the U.S., solar generation rose by 21% in the first half of the year, while wind and solar collectively contributed about 20% of output, and coal generation fell by approximately 11% due to cheap gas.
- Texas has paused approvals for new data centers, prompting the EIA to lower its forecast for the state’s energy demand growth in 2027 from 14% to 6%—a significant first signal of a cooling AI load on the grid.
- In Europe and Asia, high LNG prices are making coal more competitive against gas in electricity generation, maintaining demand for thermal coal from exporters such as Indonesia, Australia, and South Africa.
Macroeconomic Factors: Jackson Hole and Rates as a Demand Factor for Energy Resources
An additional benchmark for commodity markets will be the speech by Fed Chair Kevin Warsh at the Jackson Hole symposium on Friday. Signals regarding the trajectory of interest rates directly impact the dollar's exchange rate, the cost of financing energy projects, and forecasts for oil and gas demand. A softer rhetoric would support commodity prices, while a tough tone could increase 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 reaction from Caracas and OPEC regarding the reports of Venezuela's potential 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.
- The pace of gas injection into European storage facilities and TTF dynamics following the retreat from three-year highs.
- The OPEC+ meeting on September 6: a pause in quota increases and discussions about parameters for 2027.
- Escalation risks along the Russia-Ukraine line and the state of Russian oil refining.
- Implications of the Fed Chair’s speech at Jackson Hole for the dollar and commodity markets.
The week's conclusion: the oil market drifts towards a de-escalation scenario in the Middle East but remains held hostage by physical flows through the Strait of Hormuz and increasing uncertainty within OPEC itself, where after the UAE's exit, Venezuela is already looking to leave. Gas and diesel are the main points of global energy shortages heading into autumn 2026: Europe enters the heating season with the lowest reserves in 17 years, while coal receives an extension of its era despite the accelerating energy transition. For daily analysis on oil, gas, renewables, and the energy market, read the Open Oil Market channel on Telegram.
