Oil Market: Diplomacy over Hormuz Drives Prices Down
The oil market has experienced one of the sharpest corrections of the year. Following a July rally, when Brent exceeded $90 per barrel due to the blockade of the Strait of Hormuz, news of an impending temporary agreement between Iran, Oman, and the United States reversed the trend. The parties are discussing a 60-day plan for the division of shipping flows: tankers heading to the Persian Gulf will follow Iranian routes, while vessels leaving the Gulf will take routes near Oman, without toll charges. Against this backdrop:
- Brent was trading in the range of $78.5–79.7 per barrel by the morning of August 6, after a decline of more than 5% during the previous session;
- WTI fell to $74.8–75.2 per barrel;
- prices are consolidating in a narrow corridor of $78.6–81.3 following a sharp decline on August 3–4;
- analysts' average forecast for Brent price for the entirety of 2026 remains above $85 per barrel, indicating that the market is pricing in geopolitical risk premiums.
The US President has publicly announced "significant progress" in negotiations and a willingness to lift some sanctions against Iranian oil exports, as well as to withdraw naval forces from Iranian waters in the event of a deal. However, Tehran officially insists that it is only discussing shipping regimes with Oman and not directly with Washington, leaving room for new developments. For the oil and petroleum products market, the key question remains: will the de-escalation hold, or will tensions in the Persian Gulf resurface as early as September?
OPEC+: Conclusion of Production Increase Cycle
The OPEC+ alliance has confirmed that starting in September, seven member countries, including Russia and Saudi Arabia, will increase oil production quotas by an additional 188,000 barrels per day. This decision ends a phased return to the market of 1.65 million bpd of voluntary cuts initiated earlier this year. Key details include:
- the alliance's total permitted production level will reach 36.206 million bpd;
- Saudi Arabia and Russia will each receive equal increases of 62,000 bpd, bringing their production to 10.478 million and 9.949 million bpd, respectively;
- further increases in quotas are not planned until the end of 2026, according to sources within the organisation;
- actual production in several countries is trailing quota levels due to disruptions in export infrastructure—attacks on facilities in Russia and tensions in the Persian Gulf hinder a full recovery of supply.
The next OPEC+ ministerial meeting is scheduled for early September, and the market will be closely monitoring the alliance's rhetoric regarding 2027, especially in light of potential normalisation of the situation around the Strait of Hormuz.
European Gas Market: Record Low Storage Ahead of Winter
In contrast to oil, the situation in the European gas market remains tense. According to Gas Infrastructure Europe, as of early August, gas storage facilities (GSF) in the EU are only 57% full, which is below the previous anti-record of 2021 and significantly lower than the European Commission's target of 90% by the start of the heating season. Key factors contributing to the deficit include:
- reduced LNG supplies through the Strait of Hormuz—estimates suggest that up to 20% of global liquefied gas volumes have temporarily fallen out of logistics;
- 7% year-on-year decline in LNG imports to Europe in August;
- spot prices at the TTF hub have settled at $696 per thousand cubic meters compared to an average of $626 in July—an increase of almost 1.5 times compared to August last year;
- the contribution of wind generation to Europe’s energy balance in early August has decreased to 10% from 14% the previous year, further increasing the burden on gas generation.
Analysts warn that if the current filling dynamics continue, Europe risks entering the heating season with storage levels not exceeding 75%. For industrial gas consumers and energy companies, this means increased price volatility and the risk of spikes in electricity costs during the winter of 2026–2027.
Sanctions and Geopolitics: Between Hormuz and Ukraine
The sanctions backdrop remains a defining factor for the oil and gas sector. Washington links potential easing of restrictions on Iranian oil exports to progress regarding the Strait of Hormuz, while the sanction regime against Russian energy resources remains unchanged. Simultaneously, attacks on oil refining and export infrastructure continue to affect actual volumes of oil and petroleum products being supplied from Russia and the Persian Gulf countries. Analysts at Kpler cite this as one reason for delaying the forecast for production recovery in the Middle East from September 2026 to early 2027. For global traders and energy sector participants, the scenario remains bipolar: sustained de-escalation could return oil to the $70–75 range, whereas a breakdown in negotiations or a new attack on infrastructure could again push Brent above $90.
Russian Fuel Market: Export Restrictions Persist
Within Russia, authorities continue to manage fuel shortages with a set of administrative measures. Key decisions in recent weeks include:
- a complete ban on the export of gasoline, diesel fuel, marine fuel, and gas oil for all producers has been extended until the end of September, with the ban on gasoline effectively lasting until the end of 2026;
- from September 1, partial easing of restrictions for diesel and gas oil is anticipated from direct producers;
- retail prices for motor gasoline have risen by almost 14% since the start of the year, and diesel prices have increased by nearly 15%, significantly outpacing overall inflation;
- the import of petroleum products has been initiated to stabilise the internal balance, and special pricing rules for state fuel procurement have been suspended until the end of the year.
Experts note that external markets, particularly Europe and the US, suffer the most from Russia's export ban, where diesel shortages have already affected market prices, whereas Asia, possessing its own oil refining capacities, feels the impact less acutely.
Asian Demand: China and India Increase Purchases
The largest Asian importers continue to dictate the balance of the global oil and gas market. China retains its status as the leading buyer of Russian and Middle Eastern oil while simultaneously increasing its own production and investments in exploration. India is maintaining favourable purchasing conditions for Urals crude and concurrently developing deep-water exploration programmes to reduce its long-term dependence on imports. Both countries are the primary factors supporting demand amidst cooling consumption in developed economies.
Energy Transition: REIs Set to Overtake Coal
According to the International Energy Agency (IEA), by 2026, renewable energy sources (RES) are expected to surpass coal for the first time in the global electricity generation structure. Solar generation is projected to add approximately 600 TWh of capacity per year and become the second most significant source of "green" electricity after hydropower. Key considerations include:
- the gas crisis, triggered by disruptions in the Hormuz Strait, has accelerated the transition of several countries to solar generation as a means of reducing dependence on imported fuels;
- global growth rates for new solar capacity in 2026 could slow for the first time in 25 years due to market saturation and changes in regulatory policy;
- CO2 emissions from the energy sector are projected to rise by 1% in 2026 due to a temporary increase in coal generation amid high gas prices, but stabilisation is expected by 2027.
Coal: Temporary Comeback Amidst High Gas Prices
The rise in natural gas prices has rekindled energy companies' interest in coal generation as a backup electricity source. In the Asia-Pacific region, where the bulk of demand for energy coal is concentrated, consumption remains close to record levels. Despite long-term decarbonisation strategies, coal continues to serve as a safeguard for energy systems against gas supply disruptions, especially during peak demand periods.
Conclusion: What to Expect for Energy Sector Investors
The fuel and energy sector heads into the weekend with a contradictory set of signals. The oil market displays signs of de-escalation amidst Hormuz diplomacy; however, geopolitical risk remains high and could resurface at any moment. The European gas market, on the contrary, enters a phase of structural tension ahead of winter, which is likely to lead to rising volatility in electricity prices. The Russian fuel market maintains administrative control, while the global energy transition gains momentum despite the temporary renaissance of coal generation. For energy market participants—oil and gas companies, refineries, renewable energy investors, and petroleum traders—the key focus areas for the coming weeks remain the outcomes of negotiations over the Strait of Hormuz, the pace of gas storage replenishment in Europe, and OPEC+ decisions at the upcoming September meeting.
