Oil Market: Brent Balances at $100
Oil prices are closing the week with high volatility. On Friday, Brent fell by approximately 2.5% to just below $100 per barrel, while WTI dropped nearly 4%, reaching $89. Just the day before, Brent remained above $102. Despite the correction, oil prices remain about 1.5 times higher than a year ago.
Prices are being influenced by mixed factors:
- Reserves: The European Commission is discussing with IEA participants the timeline for a new coordinated release of strategic reserves.
- Export Recovery: Non-Iranian oil shipments through the Strait of Hormuz returned at the end of September to pre-war levels of 13.5 million barrels per day, thanks to the escorting of vessels.
- Security Risks: This week, three tankers in the strait were hit by unidentified projectiles, and negotiations between the U.S. and Iran remain stalled.
- Stocks: According to the U.S. Department of Energy, global oil inventories have decreased by approximately 400 million barrels since the beginning of the year.
OPEC+: Meeting on October 4 and Quotas 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 will remain unchanged. The formal target levels are long divorced from reality: the actual output of the alliance is approximately 5 million barrels per day below pre-war levels, as Gulf countries are unable to fully export their crude.
The primary intrigue is shifting towards 2027: the alliance is completing an audit of production capacities, based on which new baseline production levels will be determined. For oil companies and investors, this is a matter of long-term market share distribution.
Oil Products and Refineries: Diesel Becomes the Main Shortage
The oil products market is currently tighter than the crude oil market. Diesel fuel is setting price records in multiple countries, surpassing $6 per gallon in the U.S. Within a few days, supply has diminished 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 inventories have fallen to multi-year lows, with a decision on resumption expected after the holiday period 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 some tenders.
- The U.S. is considering a ban on diesel exports unless Germany and France release fuel from reserves. American refineries are operating at around 97%, and Washington acknowledges that such a ban could raise gasoline prices.
Germany and France account for about 35% of the EU's strategic diesel reserves, estimated at 39 million tons — over two months of consumption. Analysts suggest that the American ban would strike Latin America the hardest. The UN warns that global fuel subsidies could exceed $1 trillion.
Gas and LNG: Europe Enters Winter with Deficient Reserves
The European gas market remains one of the most vulnerable segments of the energy sector. Prices at the TTF hub remain around €73 per MWh, nearly twice last year's values. EU underground storage is only 71.5% full — about 20 percentage points below seasonal norms.
- Germany has tasked SEFE with injecting an additional 8 TWh of gas into storage.
- The EU is considering a one-year exemption from methane regulations for imported gas to avoid limiting LNG supplies.
- The head of Japan's JERA warned that LNG prices have not yet exhausted their potential for growth.
- LNG imports to China have decreased for the second consecutive month, while Pakistan is exploring direct purchases for power plants.
Long-term investments in the sector are accelerating: ConocoPhillips has signed a 20-year LNG supply 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 at Three-Year High
Coal continues to serve as a safety resource for energy systems in Asia. The benchmark price of thermal coal at the Qinhuangdao port has risen for 11 weeks in a row, reaching 986 yuan (approximately $147) per ton — a three-year high. Since mid-July, prices have increased by 24% due to reduced domestic output following safety inspections and a roughly quarter decline 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 expects coal demand to rise by 4.2% this year to 1.353 billion tons.
Electricity, Renewables, and Nuclear Power
Global electricity demand is growing at the fastest pace in 15 years—driven by data centers, artificial intelligence, and electrification. Grids and generation are struggling to keep up with consumption, particularly evident in developing markets.
- India: Electricity deficits reached 560 million kWh in September—the highest since August 2023. Nearly 40% of coal plants are operating at critically low fuel reserves. Renewable energy output increased by 25.1%, but its share in generation dropped to 17%.
- Nuclear Power: Amazon has signed a 20-year agreement for nuclear power supplies with Constellation, and uranium prices have hit historic highs.
- Europe: Three EU countries have advocated for a new renewable energy goal by 2040.
The energy crisis reinforces the arguments for renewables, storage, and nuclear power as tools for energy security, beyond just climate policy.
Asia: India and China Restructuring Imports
India is increasing purchases of Middle Eastern oil while reducing Russian supplies, as its refiners seek tankers for voyages through Hormuz. New Delhi emphasizes that high prices are due to chaos in shipping rather than a lack of raw materials. Rising oil prices have already led to an outflow of $3.2 billion in foreign investments from Indian markets. Analysts have also lowered China's oil import forecast for 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 the Domestic Fuel Market
The Russian oil products market remains under strict regulation. In addition to the export ban on diesel 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 explain these measures as necessary due to high demand during the harvest season and the need to replenish stocks following drone attacks on refineries. Retail gasoline prices have increased by approximately 21% since the beginning of the year, and the antitrust agency 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 the holidays in China and the potential resumption of fuel exports.
- IEA and EU Reserves: The volume and timeline for releasing oil and diesel.
- U.S. Decision on the diesel export ban and refinery margin reactions.
- Strait of Hormuz: Shipping security and the progress of U.S.-Iran negotiations.
- Weather in Europe: Early cold temperatures with storage at 71.5% could sharply increase gas and electricity prices.
The baseline scenario for the upcoming days is a continuation of high volatility: oil reacts to news regarding reserves and the Strait of Hormuz, while oil products, gas, and coal remain structurally deficient. For oil and fuel companies, this means high refining margins; for consumers and importers, it translates to ongoing price pressures.
