Crude prices stay volatile, but the real story is in products  

Remaining broadly unchanged from end of July, the Brent front-month settled at $90.49bbl on August 31, compared to $90.12/bbl on July 31. While the overall move was modest, prices were volatile throughout the month and briefly fell below $80/bbl amid expectations of renewed US-Iran negotiations. 

Those negotiations failed to materialize and, by month-end, tensions had escalated once again, with the US and Iran exchanging missile strikes for the first time in more than a month. The renewed hostilities increased concerns about oil flows through the Strait of Hormuz following reports of increased tanker movements linked to Iranian exports. US Secretary of Energy Chris Wright estimated these flows at 9 million b/d, while US Central Command (CENTCOM) suggested volumes could be as high as 10 million b/d. Independent tanker-tracking services placed exports closer to 6 million b/d, although the practice of tankers disabling their tracking signals made precise estimates difficult.  

Despite events in the Middle East, oil market fundamentals remained relatively soft. Demand from China was weak, while rising production across the Americas helped keep supplies well stocked. The real pressure was in diesel rather than crude oil. Refining margins for diesel rose above $100 per barrel, pushing diesel prices to more than double the price of crude.  

Several factors supported higher diesel prices during August. Russia extended its diesel export ban through September as Ukrainian drone attacks continued to disrupt energy infrastructure. At the same time, tensions around the Strait of Hormuz raised concerns about supplies of the heavier crude grades used to produce diesel. Seasonal demand added further support, with fuel consumption rising during the Northern Hemisphere harvest and buyers building heating oil inventories ahead of winter. Together, these factors suggested diesel prices were likely to remain elevated into September. 

65-billion-barrel deal with Venezuela  

The U.S. administration announced a deal that would give the US access to Venezuelan oil reserves estimated at 65 billion barrels. The administration said the agreement aims to strengthen the Strategic Petroleum Reserve, attract investment into Venezuela’s struggling energy sector and help lower fuel prices for US consumers. However, any increase in production is likely to take years, meaning consumers are unlikely to see an immediate impact at the pump. The announcement also drew criticism within Venezuela, where questions were raised about sovereignty and ownership of the country’s natural resources.  

Under the agreement, North American Blue Energy Partners would operate 17 oil fields under 100-year concessions. The US government would hold a 35% stake in the project, receive 20% of production at cost and retain the first right of refusal on remaining output. Venezuela once produced around 3.5 million b/d and holds the world’s largest proven oil reserves. However, years of underinvestment have reduced production to roughly 1 million b/d.  

Executive Order 14420 aims to protect the bulk-power system  

President Trump signed Executive Order 14420 on August 26, aimed at limiting foreign access to the US electricity grid and strengthening energy security. The order applies to equipment such as batteries, inverters and transformers, and raises the possibility that some existing equipment could be replaced if deemed a security risk.  

Manufacturers have called for greater clarity, particularly around software, digital technologies and how a product’s country of origin will be determined. The Department of Energy has 120 days to develop and implement the rules governing the order. The administration said the measures are intended to address growing risks to critical infrastructure, including those associated with the rapid expansion of artificial intelligence.   

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