TODAY: Could Saudi be Opec’s last heavyweight?

Good morning, friends. We have a morning about exits: from Opec, and from the strait everyone is still trying to avoid.

Venezuela is reportedly in talks with Washington about walking out of Opec, potentially following the UAE’s footsteps — a path Iraq has also dabbled with. Caracas has also granted US-backed Nabep 100-year concessions over 17 oilfields, with Washington taking a 35% stake in the company and first refusal on most of the oil. It’s a bigger agreement than one country’s production numbers: if Venezuela goes and Iraq eventually follows, there could be an Opec founder left to carry the group’s supply discipline almost entirely on its own.

AND- We’re back with another chokepoint to watch: Tehran plans to announce a new restricted maritime zone in the coming days, starting at the US naval blockade line and extending into parts of the Gulf. Any vessel that enters the zone will be added to Iran’s sanctions list, adding another variable for anyone still trying to move crude through those waters.

Iran’s not just tightening the screws, though — it's also negotiating an exit ramp. An agreement with Oman on a temporary safe shipping route through the strait is days from being finalized, Iranian Foreign Ministry spokesperson Esmail Baghaei said.

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Jazan’s third fire

Saudi Aramco’s oil hub in Jazan — the city home to the oil giant’s 400k bbl / d refinery and associated energy facilities — was struck yesterday, the Financial Times reports, citing two sources familiar with the matter. Damage to the facility is still being assessed.

This is the third major hit to Jazan in about six weeks. The Houthis claimed a drone strike on the refinery last month, which came after missiles and drones struck the same plant on 27 July, forcing Aramco to shut it and tightening Riyadh’s fallback map. The group has not claimed responsibility for yesterday’s attack, per the news outlet.

Why this matters: Jazan has already become a less reliable outlet as the fighting shifted west. The refinery shipped high volumes of refined products during the first months of the US-Iran war — but flows fell sharply after Houthi attacks on Saudi Arabia resumed. No refined products were shipped from Jazan last month.

Goldman looks past crude

The bigger Middle East energy trade may be outside crude. Goldman Sachs forecasts room for oil to climb to USD 120 / bbl if attacks on regional shipping broaden, but says natural gas and refined products offer a better hedge against the escalation because supply shocks in those markets are already more severe than in crude, Bloomberg reports, citing co-head of global commodities research Daan Struyven. The bank is recommending long positions in global natural gas and refined products such as diesel.

There is a wide range of outcomes for crude: USD 120 / bbl is the upside scenario if shipping disruptions intensify, while a normalization of regional exports could pull prices back toward USD 80 / bbl. Brent was trading near USD 97 after climbing to its highest level since July, as the US-Iran standoff over Hormuz spills into tanker attacks, port blockades, and new Iranian restrictions beyond the strait.

China can cushion the crude market by cutting imports when prices rise. That buffer is much weaker in gas and refined fuels, where supply losses are harder to offset — helping push diesel prices to more than double their level at the start of the year.

The Gulf’s infrastructure already shows why gas is harder to insulate. Adnoc Gas’ exports and liquid sales volumes fell 53% y-o-y in 2Q as disruption around Hormuz choked LNG, LPG, and naphtha shipments. Crude has more options: the UAE can partially bypass the strait by rerouting oil through pipelines to Fujairah.

Market watch

Oil prices increased this morning as fears of a prolonged Middle East conflict and supply disruptions grew, Reuters reports. Brent crude futures surged USD 0.49 to USD 97.49 / bbl by 04.00 GMT, while West Texas Intermediate (WTI) gained USD 1.44 to USD 92.92 / bbl.

The Baltic Index snaps: The Baltic Exchange’s dry bulk index — which tracks rates for the capesize, panamax, and supramax vessel segments — fell 1.4% to 3,575 points on Monday. The capesize index dipped 2.2% to 6,286 points, while the panamax declined 0.7% to 2,431 points. The smaller supramax inched up 0.4% to 1,682 points.

Data point

55.3 — that’s the UAE’s PMI reading for August, up from 52.7 in July and the fastest improvement in business conditions since December 2024, the second straight month of accelerating growth following June’s five-year low of 50.8, per the S&P Global UAE PMI (pdf). New business grew at its joint-fastest pace in more than two years, and export orders posted a second consecutive monthly expansion after a rough 2Q. Vendor performance improved too, easing input-price inflation even as firms faced higher costs for energy, fuel, cement, steel, and chemicals. David Owen, S&P Global’s principal economist, told us the non-oil economy has “shifted decisively into a higher gear.”

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