Oil Market: Brent around $87, WTI around $82 — A Week of Decline
Oil prices are correcting after a two-week rally. Brent traded near $87 per barrel on Thursday, while WTI was around $82. The weekly decline in Brent has exceeded 7%, yet since the beginning of the year, the benchmark remains over 40% higher; the premium for geopolitical risk following the closure of the Strait of Hormuz in February has not disappeared. Key price drivers for oil today include:
- Hormuz Diplomacy: Statements from Tehran and Muscat regarding a temporary shipping corridor and joint demining are the main bearish factors of the week.
- Mild Sanctions: Washington has refrained from imposing secondary measures against Iran's trading partners, easing some concerns about supply reductions.
- Physical Flows: Donald Trump announced 10 million barrels of oil passing through the strait on Tuesday, while Kpler recorded only five commercial vessels against an average of 15 over ten days. The divergence in data is preventing traders from aggressive selling.
- Russian Risk: Reports of Moscow preparing for escalation in Ukraine briefly turned the market upward on Wednesday, before news from Oman brought prices back down.
- Saudi Logistics: Satellite imagery indicates an increase in shipments from Saudi Aramco's terminals within the Persian Gulf as Riyadh restructures exports amid threats from Houthi forces in the Red Sea.
Analysts at MST Marquee describe the market as being in a "wait-and-see mode": following a series of failed ceasefires, investors are hesitant to capitalize on de-escalation until a deal is confirmed between Tehran and Washington.
Strait of Hormuz: Iran-Oman Agreement and the US Position
The key event of the week for the global oil and LNG market is progress in negotiations between Iran and Oman. On Tuesday, the foreign ministers of the two countries discussed a "preliminary framework" for resuming shipping, and on Wednesday, a representative of the IRGC announced that agreements had been reached. The main elements include:
- Creation of a temporary joint shipping corridor through the strait.
- Joint project for demining the waters.
- Division of the waters of the strait and revenues from transit between Iran and Oman.
- Negotiations on a permanent route within 30–60 days.
Tehran emphasizes that the agreement with Oman does not mean an automatic reopening of the strait, with the IRGC directly accusing the US of delaying the process. The parties missed the 60-day window set by June’s memorandum, the formal ceasefire mechanism is closed, and now the Oman-Iran track is viewed as a prelude to a direct deal with Washington. A positive signal is the reports of the US preparing to return diplomats to evacuated embassies in the Middle East. A negative sign is the tanker struck by an unidentified projectile off the coast of Oman on August 25: shipping safety has not been restored, and insurance rates remain prohibitive.
Sanctions “Economic Outlaw”: Impact Less Severe Than Market Fears
The campaign announced by US Treasury Secretary Scott Besson, dubbed "economic D-Day," appears more of a signal than a devastating blow by Thursday. The Treasury focused on Bank Melli, oil smuggling networks, and "zero leakage" of currency earnings, but did not impose secondary sanctions against China, India, or Turkey. For the oil market, this means that around 340,000 barrels per day of Iranian exports to China are still intact. Inside Iran, pressure is mounting: inflation is nearing 90%, and President Masoud Pezeshkian publicly states that the country "cannot fight forever," defending the June memorandum. This combination of economic exhaustion and diplomatic openings shapes investors' baseline scenario for the fall—a gradual restoration of flows through Hormuz while maintaining high volatility.
US Stocks: Record Low Diesel and Record Refinery Utilization
The weekly EIA report for the period ending August 21 showed a rise in commercial oil stocks of only 0.1 million barrels, to 428.9 million—1% above the five-year average. US refinery utilization reached 97.4% capacity with processing at 17.4 million barrels per day, gasoline output rose to 9.8 million barrels per day, while distillates decreased to 5.1 million. Oil imports fell by 435,000 barrels per day to 6.2 million. The key signal for the oil products market: diesel fuel stocks in the US have dropped to the lowest seasonal level on record. Europe, facing a shortage of middle distillates, has purchased diesel from Mexico for the first time in seven years. For fuel companies and traders, this means record crack spreads for diesel are likely to persist through at least the end of fall.
Gas and LNG: Europe Between €65 and €100 per MWh
The gas market remains the most vulnerable segment of the global energy landscape. TTF futures surged above €68/MWh on Tuesday—the highest since early 2023—but rolled back below €67 by Thursday following news from Oman. The fundamental picture remains unchanged:
- Storage Levels: EU gas storage is only about 61% full against a target of 80% by November 1 (down from 90%). Wood Mackenzie estimates the "best case scenario" at 75% with full restoration of Qatari exports by the end of September; if the strait remains closed for another two months, it will be under 70%.
- Price Forecasts: Goldman Sachs suggests that December's TTF could exceed €100/MWh as Middle Eastern exports gradually normalize by 2027—twice the base forecast of €50. Morningstar sees a range of €90–120 in a cold winter.
- LNG Supply: New Qatari capacities will not reach full production until the second half of 2027; the EU's ban on Russian LNG will take effect in January 2027. Europe might require around 64 billion cubic meters of US LNG.
- Asia: Spot JKM is holding around $21–22/MMBtu; Japan, Korea, and Taiwan are hedging risks with coal and the restart of nuclear power plants.
- US: Henry Hub is below $3/MMBtu with record production of approximately 122.5 billion cubic feet per day; planned maintenance at Corpus Christi LNG has temporarily reduced demand for feedstock.
OPEC+ and Russia: Paper Quotas and Declining Production
OPEC+ will convene on September 6 to make a decision regarding October; the baseline scenario is a pause in quota increases until the end of the year while maintaining around 2 million barrels per day cuts from 2022 and preparing for negotiations on quotas for 2027, where Iraq is seeking a higher level. The actual production of the alliance remains millions of barrels below February levels.
Russia serves as a clear illustration of the gap between quotas and reality. According to secondary OPEC sources, production fell to 8.89 million barrels per day in July—the lowest in six years and nearly 1 million below the allowable level. Refining dropped to 3.6 million barrels per day in July, the worst figure since 2002. Marine oil exports over the four weeks leading to August 23 decreased to 3.46 million barrels per day; strikes in Novorossiysk forced the redirection of Kazakh barrels to the Black Sea, freeing up Ust-Luga for Russian oil. The volume of Russian oil at sea has fallen to 83 million barrels—the lowest in a year—while export value dropped to $1.65 billion per week. China and India remain the main buyers, with deliveries of about 3.29 million barrels per day. Analysts estimate that Russian supply losses from infrastructure strikes are around 10%, significantly higher for oil products.
Russian Fuel Market: Fate of Diesel Exports to be Decided by September 1
The domestic fuel market in Russia remains under manual control. The ban on gasoline exports is in place until January 31, 2027, and that on aviation kerosene until the end of November. The ban on diesel fuel exports for producers expires on September 1, and according to industry sources, the government is leaning towards extending it at least until the end of September, with discussions including a possible extension until the end of the year. Deputy Prime Minister Alexander Novak stated there are no issues with diesel logistics and that several refineries are returning from maintenance; however, in August, shortages resurfaced in certain regions after a brief respite. To fill the market, imports from Belarus and Asia are being utilized, along with a temporary reduction in the exchange sales quota to 2%. For the global oil products market, this means a loss of Russian diesel volumes at the peak of European shortages.
Electric Power, Renewables, and Coal: Energy Crisis Extends the Era of Coal
The war in the Middle East has rewritten forecasts for the electric power sector. The IEA expects coal generation in 2026 to reach about 10,974 TWh—nearly a third of global output at 33,313 TWh and 77% more than wind and solar combined. Gas generation, which was anticipated to grow by 1.3%, will remain at last year's levels: expensive LNG has made coal more competitive in Europe and Asia. At the same time, the energy transition is accelerating where there are local resources:
- In the US, solar generation grew by 21% in the first half of the year, hydro by 9%, and wind by 6%; wind and solar provided 20% of output and for the first time surpassed coal and nuclear combined.
- Coal generation in the US fell by 10% to 323 TWh, while coal exports are projected at 102 million short tons due to demand from Asia.
- Texas has halted the approval of new data centers, and the EIA has reduced its forecast for state load growth in 2027 from 14% to 6%.
- US tariffs on polysilicon and solar modules since August 6 are increasing the costs of new renewable projects.
What to Watch on Friday, August 28: Calendar for Participants in the Fuel and Energy Market
- Washington's reaction to the Iran-Oman agreement and signals regarding the resumption of direct contacts.
- Kpler data on transit through the Strait of Hormuz and the investigation into the attack on the tanker.
- The Russian government's decision on diesel fuel exports post-September 1.
- Injection rates in EU gas storage and week's close for TTF amid three-year highs.
- Baker Hughes rig count and macro statistics from the US affecting demand forecast.
- The threat of Houthis to the Red Sea and restructuring Saudi export logistics.
- Preparation for the OPEC+ meeting on September 6 and signals of a pause in quota increases.
The week concludes: the oil market is drifting towards a de-escalation scenario but remains a hostage to physical flows through Hormuz, where data from the White House and tracking companies diverge significantly. Gas and oil products—diesel in the US and Europe, and LNG for EU storage—have become the main points of deficit in the global energy landscape for fall 2026, while coal has received an unintended reprieve in the energy transition. For daily analytics on oil, gas, renewables, and the fuel and energy market, follow our Telegram channel, Open Oil Market.
