Oil Market: Brent at $88 — A Week of Decline after Two Weeks of Rally
Oil prices fluctuated widely over the week. On Monday, Brent dropped about 2.5%, falling to $92 amid 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 modest decline. Overall, Brent fell more than 5% and WTI about 4% over five sessions. However, the benchmark remains approximately 25–40% higher than pre-crisis levels since the geopolitical risk premium following the closure of the Strait of Hormuz in February has not dissipated. Key drivers of oil prices include:
- Diplomacy in the Strait of Hormuz: The agreement between Iran and Oman on a temporary corridor and joint demining is the main bearish factor.
- The Venezuelan Factor: Reports of negotiations between Caracas and Washington regarding access for U.S. companies to Venezuelan oil fields have heightened expectations for an increase in supply.
- Strong Rhetoric: The White House's refusal to revert to the June memorandum terms with Tehran briefly turned the market upward (+2.1% for Brent in the session).
- Russian Risk: Attacks on Russian refineries and ports are limiting the export of oil and petroleum products, providing support for prices from below.
The EIA forecasts an average Brent price of around $85 in the third quarter and does not expect a return to pre-war Middle Eastern production levels before early 2027. Global oil stocks continue to decline: according to IEA estimates, reported reserves have fallen by 410 million barrels since the onset of the 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 nations 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 made. The country produced about 1.16 million barrels per day in July, which is half of what it produced 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 move raises questions about the cartel's cohesion ahead of the OPEC+ meeting on September 6, where the baseline scenario remains a pause in raising quotas until the end of the year.
Strait of Hormuz: Six Months of Crisis and the Iran-Oman Corridor
Friday marked six months since the onset of the war that closed this vital artery of the global energy market, through which around 20 million barrels per day of oil and petroleum products previously flowed. The current framework for resolution looks like this:
- Iran and Oman have agreed on a temporary shipping route: entry and part of the exit will take place through Iranian territorial waters.
- The parties have agreed on joint demining of the waters and the division of transit revenues.
- Technical negotiations regarding 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 delaying the deal. President Trump states that he is “in no rush,” while the U.S. Treasury prepares to demand that G20 partners cut ties with Iran under the threat of being disconnected from the dollar system. For the energy sector, this means sustained high volatility: physical flows are recovering slowly, and insurance rates remain prohibitively high.
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, finishing the week around €65 per MWh on news of de-escalation. The fundamental picture is concerning:
- Storage: EU gas storage facilities are only about 61–63% full — a multi-year low for the end of August compared to nearly 74% a year earlier; the target level for November 1 has been reduced to 80%.
- Forecasts: With a cold winter and slow recovery of Qatari exports, analysts suggest December TTF could exceed €100/MWh.
- Asia: Spot LNG JKM remains around $21–22/MMBtu, with increased competition for Atlantic cargoes expected in the fall.
- U.S.: Henry Hub remains below $3/MMBtu amid record production — American LNG is becoming the main resource for closing Europe’s deficit.
Petroleum Products: Record Diesel Deficit in the Atlantic Basin
U.S. refineries are operating at about 97% capacity, but diesel fuel stocks in the U.S. have dropped to seasonal lows not seen in recorded history. Europe, which has 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 — for refineries and fuel companies, this is the main source of margin, while for consumers, it poses an inflationary factor on the eve of the heating season.
Russia: Declining Refining and the Fate of Diesel Exports
The domestic fuel market in Russia remains manually controlled. The ban on gasoline exports is in effect 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; discussing an extension through the end of the year is also on the table. The reasons include the consequences of drone attacks on refineries, a renewed local deficit in several regions in August, and refining rates at a two-decade low. For the global petroleum products market, this means a reduction of Russian diesel volumes at the peak of Europe’s deficit; domestically, it translates into fuel imports from Belarus and Asia as a safeguard.
Electricity, Renewables, and Coal: Crisis Extends the Coal Era
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 will account for nearly a third of global electricity generation in 2026. At the same time, renewable energy is accelerating where there are domestic resources: in the U.S., solar generation has increased by more than 20% over the past six months, while wind and solar together have surpassed both coal and nuclear for the first time. Constraining factors include tariffs on solar modules and a pause in the approval of new data centers in Texas, cooling demand growth forecasts for electricity.
Market Participants' Calendar for the Week: What to Watch
- OPEC+ Meeting on September 6: Decision on quotas for October and reaction to the Venezuelan move.
- Russian government's decision on diesel fuel exports following September 1.
- Progress in technical negotiations between Iran and Oman and dynamics of transit through the Strait of Hormuz.
- Rate of gas injection into Europe’s storage and TTF quotes at the end of summer.
- Signals from Washington regarding Venezuelan fields and sanctions pressure on Iran through the G20.
Conclusion
The oil market is drifting towards a scenario of gradual de-escalation in the Middle East but remains a hostage to physical flows through the Strait of 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 for fall 2026, while coal has received an unplanned reprieve in the energy transition. For investors and energy companies, the upcoming week — with the OPEC+ meeting and Moscow's decision on diesel — will be crucial for positioning ahead of the fourth quarter.
