Oil Market: Brent at $88—Week Ends with a Decline of Over 5%
Oil prices are correcting after a two-week rally. Brent traded near $88 per barrel on Friday, while WTI hovered around $82–83. The weekly drop for Brent surpassed 5%, with WTI losing more than 4%; however, year-to-date, the North Sea benchmark is still about 30% higher on an annual basis: the premium for geopolitical risk after the closure of the Strait of Hormuz in February persists. Key drivers of oil prices heading into the weekend:
- Diplomacy over Hormuz: The Iran-Oman agreement on the division of control and revenues from transit through the strait remains the main bearish factor of the week, although Tehran emphasizes that immediate reopening of shipping will not occur.
- Firm Washington Stance: On Friday, prices briefly turned up on reports that the U.S. is ruling out a return to the terms of the June peace memorandum with Iran—the market interpreted this as a delay in finalizing a deal.
- Russian Risk: Vladimir Putin's statements about the unsuccessful negotiations with Ukraine and the preparation for an intensification of hostilities, along with ongoing strikes on Russian refineries and ports, limit Russia's export potential and support prices from below.
- Gulf Logistics: Saudi Arabia is increasing shipments from terminals within the Gulf, restructuring export routes due to Houthi threats 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 exploring an exit from OPEC. The topic is being discussed in negotiations with U.S. officials, but no final decision has been made. The context makes this narrative strategic for the entire global oil market:
- Venezuela is one of the five countries that founded OPEC in 1960 and possesses the world's largest proven oil reserves, with current production at only about 1–1.2 million barrels per day.
- The U.S. is discussing long-term agreements for American companies' access to Venezuelan fields; some officials see an alliance between Washington and Caracas as a counterbalance to OPEC's influence.
- This marks the second potential exit this 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 source of supply to the market over a few years—a factor that could exert downward pressure on long-term prices.
for investors, the "Vexit" scenario primarily raises questions about the cartel's manageability: further fragmentation of OPEC+ increases the risk of a market share battle reminiscent of 2020. An interim benchmark will be the alliance's 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 a Fragile Diplomatic Window
Friday, August 28, marked a symbolic date—exactly six months since the beginning of the U.S. and Israel’s military operation against Iran and the subsequent closure of the Strait of Hormuz, through which about 20% of the world's oil trade and nearly one-fifth of LNG passed before the war. The current status of this key artery in global energy:
- Iran and Oman have agreed on corridor routes: incoming traffic via the northern corridor in Iranian waters, outgoing through the southern corridor in Omani waters, as well as a revenue-sharing agreement from transit and joint demining of the area.
- Tehran emphasizes that the agreement with Muscat does not mean an automatic reopening of the strait as long as the U.S. fails to meet its obligations; traffic remains significantly below pre-war levels of around 130 vessels per day.
- Maritime security has not been restored: an attack on a tanker off the coast of Oman on August 25 is keeping insurance rates at prohibitive levels.
- U.S. Treasury Secretary Scott Bessen is preparing to demand that G20 partners reduce ties with Iran under the threat of restricting access to the dollar system—sanction pressure is shifting to the financial realm.
Gas and LNG: Europe Enters Autumn with Minimum Storage Levels Since 2009
The gas market remains the most vulnerable segment of the global energy landscape. TTF futures hit above €68/MWh at the beginning of the week—the highest since early 2023—but retreated to around €65–67 by Friday on news of diplomatic progress. The fundamental picture is concerning:
- Storage: EU underground gas storage is only ~63% full—its lowest for the end of August since 2009—with a target level of 80% by November 1, down from the previous target of 90%.
- Qatar: Over six months of blockades, the world's second-largest LNG exporter has lost about $24 billion in revenue, with shipments during certain periods dropping by 96%—an unprecedented supply shock.
- Price Predictions: With a slow normalization of Middle Eastern exports, December TTF could rise above €100/MWh—double the baseline estimates from the start of the year.
- Regulatory Factor: The EU ban on Russian pipeline gas and LNG has been in effect since March 2026 with transitional periods, which narrows the maneuvering space during shortages.
- Market Divergence: Asian JKM remains at $21–22/MMBtu, while the American Henry Hub is below $3/MMBtu amid record production: the spread boosts interest in new U.S. LNG export projects.
Oil Products: Record Low Diesel in the U.S. and Record Refinery Utilization
A fresh EIA report recorded U.S. refinery throughput at 97.4% capacity—processing reached 17.4 million barrels per day, while commercial oil inventories changed little (428.9 million barrels). The main signal for the oil products market: diesel inventories in the U.S. have fallen to the lowest seasonal level on record. Europe, experiencing a shortage of middle distillates following the drop in Russian and Middle Eastern volumes, has, for the first time in seven years, imported diesel from Mexico. For fuel companies and traders, this means that record crack spreads for diesel will persist at least until the end of autumn—and the market will be highly sensitive to any news regarding the state of refineries on both sides of the Atlantic.
Russia: The Fate of Diesel Exports to Be Decided This Weekend
The domestic fuel market in Russia remains under manual control, and the coming days will be decisive. The current ban on diesel fuel exports for producers expires on September 1; according to industry sources, the government is leaning towards an extension at least until the end of September, with a discussion of an option 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 stated there is no shortage of diesel and that several refineries are returning from maintenance; however, drone strikes on refining infrastructure continue to limit output: processing levels in the summer fell to their lowest in over two decades, while production in July—around 8.9 million barrels per day—was the lowest in six years. For the global market, this means a loss of Russian diesel volumes amid the peak European shortage of middle distillates.
Electricity, Renewables, and Coal: Energy Crisis Prolongs the Era of Coal, But Energy Transition Accelerates
Expensive LNG has rewritten the balance of global electricity generation: coal has received an unplanned reprieve and remains the largest single source of generation, providing about a third of global output. Meanwhile, the combined total of renewable sources—solar, wind, hydro, and bioenergy—is projected by the IEA to surpass coal for the first time in 2026. The regional picture is contrasting:
- In the U.S., solar generation increased by 21% in the first half of the year, while wind and solar contributed about 20% to generation, and coal generation declined by approximately 11% due to cheap gas.
- Texas has halted approvals for new data centers, prompting the EIA to reduce its forecast for energy consumption growth in the state in 2027 from 14% to 6%—the first noticeable signal of cooling AI demand on the grid.
- In Europe and Asia, expensive LNG makes coal more competitive than gas in electricity generation, sustaining demand for thermal coal from exporters—Indonesia, Australia, and South Africa.
Macro Focus: Jackson Hole and Interest Rates as a Demand Factor for Energy Commodities
An additional benchmark for commodity markets will be the speech by Fed Chairman Kevin Warsh at the Jackson Hole symposium on Friday. Signals regarding the trajectory of interest rates directly affect the dollar's value, the cost of financing energy projects, and forecasts for oil and gas demand. A softened rhetoric would support commodity prices, while a firm tone could intensify pressure on oil, which is already reacting to diplomatic news.
What to Watch This Weekend and Next Week: Calendar for Energy Market Participants
- The official response from Caracas and OPEC regarding reports of Venezuela’s possible 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 Iran-Oman corridor.
- The rate of gas injection into European underground storage and TTF dynamics after the retreat from three-year highs.
- The OPEC+ meeting on September 6: a pause in raising quotas and discussion on parameters for 2027.
- Escalation risks along the Russia-Ukraine line and the state of Russian oil refining.
- Consequences of the Fed Chairman’s address in Jackson Hole for the dollar and commodity markets.
The week's outcome: the oil market drifts towards a de-escalation scenario in the Middle East but remains beholden to physical flows through the Strait of Hormuz and growing uncertainty within OPEC itself, where after the UAE's exit, Venezuela is now considering leaving. Gas and diesel are the main points of deficit in the global energy market entering autumn 2026: Europe enters the heating season with the lowest stocks in 17 years, while coal is granted an extension to its era despite the accelerating energy transition. Daily analytics on oil, gas, renewables, and the energy market can be found in the Telegram channel Open Oil Market.
