Oil Market: Brent at $88 - A Week of Decline After Two-Week Rally
Oil prices fluctuated widely over the week. On Monday, Brent fell by about 2.5%, dipping to $92 in reaction to new U.S. sanctions against Iran. By Thursday, the price retreated to $88, and on Friday, the market closed the week with a moderate decrease. The result was a more than 5% decline for Brent and approximately 4% for WTI over five sessions. However, year-to-date, the benchmark remains 25–40% higher than pre-crisis levels, as the geopolitical risk premium following the closure of the Strait of Hormuz in February remains intact. Key drivers for oil prices include:
- Diplomacy over Hormuz: The agreement between Iran and Oman on a temporary corridor and joint demining is the main bearish factor.
- Venezuelan Factor: Reports of negotiations between Caracas and Washington regarding access for American companies to oil fields have heightened expectations for supply increases.
- Hardline Rhetoric: The White House's refusal to return to the terms of the June memorandum with Tehran briefly turned the market upward (+2.1% for Brent during the session).
- Russian Risk: Attacks on Russian refineries and ports are limiting oil and petroleum product exports, providing underlying support for prices.
The EIA forecasts an average Brent price of around $85 in the third quarter and does not expect Middle Eastern production to return to pre-war levels until early 2027. Global oil inventories continue to decrease: according to the IEA, observed reserves have fallen by 410 million barrels since the war began.
Venezuela and OPEC: A Blow to the Cartel's Unity
The main corporate-political news at the week's end is that Venezuela, one of the five founding OPEC countries, is exploring plans to exit the organization. The issue is being discussed in contacts with U.S. officials alongside negotiations regarding U.S. companies' access to Venezuelan oil fields; no final decision has been made yet. The country's production in July was about 1.16 million barrels per day—half of what it was a decade ago—so the direct effect on the oil market balance is limited. However, the symbolic significance is immense: following the recent exit of the UAE, another defection raises questions about the cartel's cohesion ahead of the OPEC+ 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 the Iran-Oman Corridor
Friday marked six months since the onset of the war, which closed a 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 is as follows:
- Iran and Oman have agreed on a temporary maritime route: entrance and part of the exit will occur through Iranian territorial waters.
- The parties have agreed on joint demining of the waters and the sharing of transit revenues.
- Technical negotiations regarding a permanent corridor and future management of the strait will continue.
Tehran emphasizes that full reopening of the strait is not possible without the U.S. fulfilling its commitments, and the IRGC directly accuses Washington of delaying the agreement. President Trump states that he is “in no rush,” while the U.S. Treasury prepares to demand that G20 partners reduce ties with Iran under the threat of being cut off from the dollar-based financial system. For the energy sector, this implies continued high volatility: physical flows are recovering slowly, and insurance rates remain prohibitive.
Gas and LNG: Europe Between €65 and €100 per Megawatt-hour
The gas market remains the most vulnerable segment of the global energy landscape. TTF futures dropped from a 3.5-year high of €68.46 and ended the week around €65 per MWh following news of de-escalation. The fundamental picture is concerning:
- Storage: EU gas storage facilities are only about 61–63% full—a minimum for the end of 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 in Qatari exports, analysts anticipate the December TTF could exceed €100/MWh.
- Asia: Spot LNG prices for JKM are hovering around $21–22/MMBtu, with competition for Atlantic cargoes set to intensify in the fall.
- USA: Henry Hub remains below $3/MMBtu with record production—American LNG is becoming the primary resource to mitigate European shortages.
Refined Products: Record Diesel Shortages in the Atlantic Basin
U.S. refineries are operating at around 97% capacity, yet diesel inventories in the U.S. have fallen to minimum seasonal levels on record. Europe, having lost Middle Eastern and some Russian volumes, has for the first time in seven years sourced diesel from Mexico. Crack spreads for middle distillates remain at record highs—this is a significant source of margin for refineries and fuel companies, while for consumers, it represents an inflationary factor at the onset of the heating season.
Russia: Declining Refining and the Fate of Diesel Exports
The domestic fuel market in Russia remains under tight control. The ban on gasoline exports is effective until January 31, 2027, while the ban on aviation kerosene lasts 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; discussions are also underway regarding a potential extension until the end of the year. The reasons include the consequences of drone attacks on refineries, a local deficit that has reemerged in several regions in August, and refining at lows not seen in over two decades. This implies a loss of Russian diesel volumes at the peak of European shortages for the global refined products market; internally, it necessitates fuel imports from Belarus and Asia as a safeguard.
Electricity, Renewables, and Coal: Crisis Extends the Era of Coal
The energy crisis has rewritten the trajectory of the energy transition. Expensive LNG has made coal more competitive in Europe and Asia: estimates suggest that coal generation will account for nearly one-third of global electricity output in 2026. Concurrently, renewable energy is accelerating where there are domestic resources: in the U.S., solar generation has increased by more than 20% over the first half of the year, and wind and solar have for the first time overtaken coal and nuclear combined. Constraining factors include tariffs on solar modules and a pause in the approval of new data centers in Texas, which dampens electricity demand growth forecasts.
Week's Calendar: What Energy Market Participants Should Watch
- OPEC+ meeting on September 6: decision on October quotas and response to the Venezuelan defection.
- Russian government's decision on diesel exports after September 1.
- Progress on technical negotiations between Iran and Oman and the dynamics of transit through the Strait of Hormuz.
- Gas injection rates into European storage facilities and TTF prices as summer concludes.
- Signals from Washington regarding Venezuelan deposits and sanction pressures on Iran through 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 global energy heading into fall 2026, and 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 diesel decision—will be pivotal for positioning in the fourth quarter.
