Key Developments for the Morning of Wednesday, 29 July 2026
- Oil. Nearby Brent futures are trading around $86–87 per barrel, while WTI is approximately $81. On Monday, both benchmarks lost about 8%, marking the largest single-day decline in several months.
- Geopolitics. The US has suspended a series of nighttime strikes on Iran; Washington describes this as a "pause for negotiations," whilst Tehran has yet to confirm any concessions.
- Logistics. Net oil and oil product exports through the Strait of Hormuz for the week ending 24 July averaged approximately 2.9 million barrels per day, down from 5.9 million bpd the previous week.
- Gas. Spot TTF rose to around $744 per thousand cubic metres, compared to an average of $532 in June — the highest since December 2022.
- Electricity and Renewables. Solar generation accounted for approximately 25% of electricity production in the EU for the first time, surpassing nuclear, gas, and wind.
- Russia. The ban on gasoline exports has been extended until the end of 2026, with the import duty now applied to diesel fuel.
Oil: The Market is Removing the War Premium
The central theme in the oil market is the rapid decrease of the geopolitical premium. On 23 July, Brent reached a six-week high amid the twelfth consecutive nighttime strike by the US on Iranian facilities and escalating tensions in the Red Sea. Following news of the suspension of strikes, prices opened the week with a plunge, first to $86.8 and then below $85—marking the first time below this level since 17 July. By Monday evening, the market had recovered some losses, but the decline continued into Tuesday, and by Tuesday–Wednesday, oil remained close to three-week lows.
Fundamentally, the market is being influenced by three forces:
- Diplomatic Hope. The pause in strikes is interpreted by traders as a window for a deal and a precursor to the unblocking of shipping routes.
- Physical Deficit. Supplies through the Strait of Hormuz remain at half the normal rate, while insurance rates for vessels in high-risk areas are significantly higher than pre-war levels.
- Return of Supply. The partial return of Iranian barrels to the market is intensifying competition for Asian buyers and exerting downward pressure on differentials.
Analysts from investment banks had previously raised their Brent forecast for 2026 to $85, accounting for prolonged disruptions in the strait. The current de-escalation is likely to position this benchmark as more of an upper than a lower boundary for future scenarios.
The Strait of Hormuz and the Red Sea: The Bottleneck of the Global Energy Sector
Prior to the conflict, approximately a quarter of maritime oil trading and around 20% of global LNG traversed the Strait of Hormuz. Currently, movement has only been partially restored: tankers mainly traverse the northern corridor along the Iranian coastline, with pumping rates fluctuating from week to week.
Concurrently, the second route has also intensified in conflict. Yemeni Houthis announced attacks on the East-West pipeline, which connects Saudi Arabian oil fields to the port of Yanbu on the Red Sea, along with strikes on infrastructure in the Jazan area. This pipeline serves as the primary alternative route in the event of a blockage in Hormuz, so any prolonged interruptions in its operations instantly reintroduce the risk premium into oil and freight prices.
OPEC+: Quotas Increase, Actual Production Lags
Formally, the alliance continues its course towards easing restrictions. The combined ceiling for the 'seven' key participants in July was raised to 30.633 million bpd from 29.548 million bpd in June. However, actual volumes remain far from the permitted levels:
- Saudi Arabia was producing approximately 3.44 million bpd below its quota;
- Iraq — 2.38 million bpd below;
- Kuwait — 1.18 million bpd below;
- Russia, in June, produced 8.928 million bpd, lagging behind plans by 834,000 bpd;
- Kazakhstan, on the other hand, exceeded its quota by more than 1.15 million bpd.
The lag in Middle Eastern producers is attributed not to discipline but to the physical inability to deliver crude. The UAE's exit from OPEC and OPEC+ effective 1 May further reduced the manageability of the agreement. The practical implication for the market is that the alliance has a significant "sleeping" export potential, which will be released into the market immediately following the normalisation of shipping — this represents the main medium-term bearish factor for oil.
Gas and LNG: Europe Pays for Delays in Storage
The European gas market is moving inversely to oil. By 19 July, EU underground storage facilities were approximately 54% full (about 57.7 billion cubic metres) — nearly 16 percentage points below the five-year average. The rate of injection is slowing: in June, the daily replenishment was around 308 million cubic metres, while in July it is around 270 million cubic metres, compared to 338 million cubic metres a year earlier.
Why Gas Prices are Rising
- LNG imports in July are expected to fall to approximately 6.5 million tonnes — the lowest in two years and about a quarter of the year-on-year decline;
- Asia is purchasing available cargoes: for the Asia-Pacific region, this is about current consumption, while for the EU, it's about reserves;
- Qatar is gradually restoring shipments from Ras Laffan and promises to return the bulk of capacity within two months following the complete opening of the strait;
- From 1 January 2027, the EU import ban on Russian LNG under long-term contracts will come into effect, with piped gas restrictions set for 30 September 2027.
Conservative estimates suggest that by early November, EU underground storage could only reach around 75% capacity — near historic lows. This keeps the premium on winter contracts and renders European industry structurally vulnerable for another heating season.
Coal: Correction Following Escalation
The coal market adjusts for oil and gas volatility with a lag. In mid-July, European energy coal indices rose above $118 per tonne, following oil and gas, but last week, prices corrected downward in Europe, China, and Australia. Inventories at the nine largest ports in China remain around 29 million tonnes, limiting growth potential.
For Russian exporters, the situation is mixed. Transshipment through the Black and Azov Sea ports in the first half of the year grew by 21.5%, reaching 13.9 million tonnes, bolstering overall exports. However, sanctions, high railway tariffs, and a strengthening rouble are squeezing margins, while competition for Turkish and Asian markets is intensifying. The long-term outlook is guided by China's five-year energy development plan for 2026–2030: demand for coal and oil is expected to peak in the next five years, after which they will transition to reserve status.
Electricity and Renewables: Record Solar Generation and High Evening Prices
In June, solar power plants accounted for approximately 25% of electricity generation in the EU for the first time, surpassing nuclear generation, gas, and wind; monthly records were set in 18 EU countries. On certain days, the share of renewables in Germany approached 74%, with solar generation reaching 37.5%.
The flip side of these records is the rising volatility of electricity prices. A lack of storage systems leads to daily surpluses being wasted, while evening peaks are covered by expensive gas and coal generation. An additional factor is restrictions on French nuclear power stations due to river water temperatures during periods of heat. For investors, this shifts focus from the commissioning of new renewable capacity to networks, battery storage, and flexible demand.
Russia: Fuel Market, Refineries, and Price Controls
The domestic fuel market remains under tight control. The current set of measures includes:
- A complete ban on gasoline exports, extended until the end of 2026;
- A ban on the export of diesel fuel, marine fuel, aviation kerosene, and gas oil;
- A reduction in the mandatory exchange sales norm for gasoline from 15% to 10% for the period from 1 July to 30 September;
- Maximum capacity utilisation at refineries, reduction in the duration of current repairs, and postponement of planned maintenance;
- An import price control mechanism, extended in July to include gasoline, and after amendments to the Tax Code — also to diesel and middle distillates (for the duration until July 2027);
- A zero import duty and increased supplies from EAEU countries.
A mechanism for counting direct contracts when calculating exchange norms is also being prepared — the authorities hope to mitigate the risk of local shortages in regions.
Russian Oil Exports: Discounts versus Revenue
The physical volumes of Russian oil exports are near their highest levels since the beginning of the year, but the pricing aspect is deteriorating. The Urals discount in the first half of July increased by approximately $3 per barrel compared to June; on an FOB basis in Baltic ports, the spread to Dated Brent was estimated between $25–28 per barrel against a five-year average of about $19.8. The average price used for calculating the Mineral Extraction Tax (MET) in July was around $50.4 per barrel compared to $63.5 in June.
Given that the budget was planned based on an Urals price of around $59 per barrel, and the deficit is already significantly exceeding the annual target, the decline in prices observed in July will impact treasury revenues in August. The return of Iranian barrels to the Indian market intensifies competition and raises the likelihood of further discounts.
What Energy Market Participants Should Monitor in Upcoming Sessions
- Format of US-Iran Negotiations: Confirmation of direct contacts could push Brent into the $75–80 range.
- Flow Rates through Hormuz: A return to 5–6 million bpd will signal the end of the supply crisis.
- Houthi Attacks on Saudi Infrastructure: Strikes on Yanbu and the East-West pipeline will instantly reintroduce the risk premium.
- Gas Injection Rates into EU Storage: Lagging behind schedule in August will signify an expensive winter and high TTF.
- Restoration of LNG Shipments from Qatar: A key factor for balancing Europe and Asia.
- OPEC+ Decisions on September Quotas and the actual capabilities of participants to fulfil them.
- Russian Exchange Prices for Gasoline and Diesel in the context of prolonged export bans and import price controls.
The conclusion for investors and participants in the energy market is that oil is entering a price normalisation phase amidst ongoing logistical abnormalities, gas remains the most stressed segment of the global energy landscape, coal is trading sideways, and the electricity sector is increasingly dependent on flexible networks rather than installed capacity. Any of the aforementioned factors could alter the entire configuration of the commodity and energy markets within a single session.
