Oil Market: Brent around $92, WTI around $85 — Pause After Rally
Oil prices ended Monday down more than 2%: Brent closed near $92 per barrel, while WTI trades around $85. This marks the first significant correction after two weeks of growth, during which the market priced in stalled negotiations concerning the Strait of Hormuz and attacks on vessels in the Persian and Oman Gulfs. Compared to pre-war levels (approximately $71 for Brent at the end of February), the geopolitical risk premium remains around 30%.
Key factors influencing price dynamics today include:
- Sanction Factor: The market is awaiting specifics regarding new US restrictions—tightening pressure on Iranian oil buyers may reduce supply, but it simultaneously raises the risk of escalation in the strait.
- Physical Flows: Transit through the Strait of Hormuz remains significantly lower than pre-war levels of around 110 vessels per day; tracking data shows that some days only a few dozen crossings are recorded, while hundreds of tankers await offshore.
- EIA Forecast: The US Energy Information Administration expects an average Brent price of around $85 in the third quarter and about $87 for the full year of 2026; a return of Middle Eastern production to pre-war levels is not expected before early 2027, with a continued decline of approximately 0.6 million barrels per day until the end of next year.
- Stocks: An API report is due on Tuesday evening, followed by EIA data on Wednesday; US commercial crude oil inventories remain below the five-year average, which supports the market's temporary structure.
“Economic Outcast”: The US Moves the Conflict with Iran into the Financial Realm
On August 24, US Treasury Secretary Scott Bessent unveiled a campaign that the administration itself dubbed “economic D-Day.” Its aim is to “cut off all economic lifelines” to the Iranian regime and restore shipping through the Strait of Hormuz without a new round of airstrikes. Key elements of the package include:
- Sectoral sanctions defined across five areas labelled "vital" for Tehran: digital assets, technology, gold, aviation, and maritime transport.
- More than 60 legal and natural persons, as well as vessels, included in OFAC lists— including a network of brokers and a "shadow fleet" operating through the UAE, Hong Kong, China, Singapore, and Switzerland for transporting Iranian oil.
- Expansion of secondary sanctions risk for any counterparties to Iran: countries will be given a specific deadline to wind down ties before unilateral measures follow.
- A promise of significant sanction action against an unnamed financial institution by the end of the week.
The most rigid blow has been postponed for now: Bessent described the announcement as a "warning shot," while President Trump is personally calling world leaders with "specific requests." Experts assess that China, India, Turkey, Iraq, and the UAE are at risk. Tehran has responded with a promise of a "seismic" reaction, and the Iranian finance ministry has expressed full preparedness for new restrictions. For the oil market, the crucial question is whether Washington will impose sanctions against Chinese banks: China remains the primary buyer of Iranian oil, although maritime blockades have already reduced its imports from Iran to about 340,000 barrels per day, down from 1.14 million in March.
Strait of Hormuz: Tanker Attack and Negotiations via Oman
Early on Tuesday, the British UKMTO centre reported that an oil tanker was struck by an unidentified projectile approximately nine nautical miles off the coast of Oman: the engine room was damaged, the crew was unharmed, and environmental consequences are being assessed. The incident confirms that despite US claims of "full control" over the strait, maritime safety has not been restored.
The diplomatic track remains active. Iran and Oman continue discussions on a shipping management protocol, with indirect contacts between Tehran and Washington occurring through Pakistan. However, positions are firm: Iran insists on the lifting of the US maritime blockade and recognition of its right to regulate (and charge) vessel passage, while Washington demands freedom of navigation. A memorandum from June 17 has already collapsed once in July, hence the market assesses the chances of a swift breakthrough with caution.
OPEC+: Quotas Restored, Physical Production — Not
The September quota increase of 188,000 barrels per day concludes a reversal of the voluntary cuts of 2023 amounting to 1.65 million barrels per day. Seven member countries of the alliance (Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, Oman; the UAE exited OPEC in May) have indicated that quotas are likely to remain unchanged through the end of the year. The next decision regarding October is expected on September 6.
A key nuance for investors: paper quotas and actual production have diverged. Due to the closure of the strait, strikes on infrastructure, and forced stoppages, actual OPEC+ production remains several million barrels per day below February levels. This is why analysts warn that once flows normalise, the alliance will have to manage not a shortage but a potential surplus.
Gas and LNG: TTF above €65/MWh Amid Delays in Injection into UGS
The European gas market remains the most stressed segment of the energy sector. September futures at the TTF hub are trading near €65/MWh—the highest since January 2023 and over 20% higher than two weeks ago. The reasons include:
- Qatari LNG Shortages: Shipments from the Persian Gulf via the Strait of Hormuz are sporadic, and QatarEnergy is slow to return to a full schedule.
- Low Stock Levels: EU underground gas storage was only 61.4% full as of August 17, compared to nearly 74% a year ago; the target for November 1 has had to be lowered from 90% to 80%.
- Heat and Hydropower: Abnormal temperatures increased gas demand for generation, while record-low hydropower production intensified the load on gas-fired units.
- Competition with Asia: Spot LNG prices in JKM are holding around $21+/MMBtu; Japan, Korea, and Taiwan are partially hedging their risks with coal.
Against this backdrop, the American Henry Hub remains below $3/MMBtu with record US production at around 122.5 billion cubic feet per day—the spread between American and global gas continues to justify waves of investments in export LNG terminals.
Electricity and Renewables: Record Solar Generation Saves Grids
The summer of 2026 has become a stress test for Europe's energy systems. In June and July, hydropower generation in the EU fell to its lowest point in at least a decade, France reduced nuclear power generation due to overheated rivers, and intra-day prices in France and Germany peaked over €300/MWh in the evening, while in Southeastern Europe, prices reached €700/MWh. However, grids held up thanks to record solar generation: on peak hot days, output from solar stations was 17% higher than usual. The main takeaway for regulators is that the deficit occurs in the evening hours, hence investments in storage are accelerating: the UK is subsidising 7.6 GW of long-term battery systems, while Spain may triple its storage capacity by the year's end.
In the US, wind and solar generation in the first half of the year surpassed coal and nuclear combined for the first time, accounting for 20% of total output; solar generation rose by 21%, hydropower by 9%, and wind by 6%. Demand from data centres remains a growth driver, though Texas has paused approval for new sites.
Coal: Newcastle around $130 per tonne, Asia Hedging LNG Risks
Thermal coal at Newcastle has stabilised around $130/tonne after averaging $144 in June. Price pressures stem from cooling demand in China due to a rainy summer and rising domestic production in India (+7.5% YoY in July, reaching 69.75 million tonnes). Support comes from energy security: Japan, South Korea, and Taiwan are increasing coal purchases as a hedge against LNG supply disruptions. The consensus for Q3 is around $130/tonne, gradually decreasing to $120 by 2027; coking coal remains around $240/tonne amid restrictions in China.
Russia: Record Oil Exports to Asia, Domestic Fuel Market in Manual Mode
Russian oil exports are being redirected to the East. In July, China bought 50% of Russia's crude oil, while India accounted for 37%; Indian refineries imported a record 2.8 million barrels per day—55.5% of the country's total imports. The average price of Urals in July was about $60 per barrel—above the new G7 and EU ceiling of $44.10, effective since February. Chinese purchases of Russian seaborne shipments rose by 28% month-on-month: refineries are replacing lost Middle Eastern barrels.
The domestic fuel market is experiencing a second wave of crisis:
- The ban on gasoline exports has been extended until January 31, 2027, while restrictions on diesel fuel remain in place until September 1, with no decision yet made on extending it for producers;
- Deputy Prime Minister Alexander Novak announced that several refineries are returning to operation following repairs and confirmed that the federal headquarters convenes twice weekly;
- The deficit is being covered by imports (Indian gasoline has entered the market) and the production of fuels of environmental classes K-2 to K-4, which will not exceed 10%;
- In the south, including Krasnodar Krai, oil companies are introducing fuel release limits during the peak holiday season;
- A ban on exporting aromatic hydrocarbons—which are raw materials for high-octane components—is being discussed.
What to Watch on August 26: A Calendar for Energy Sector Stakeholders
- Details on US sanctions—the list of countries receiving "deadlines" and the announced decision regarding the financial institution.
- Investigation into the attack on the tanker off the coast of Oman and the reaction from insurers and shipowners.
- Progress in Iran-Oman negotiations on the shipping protocol in the Strait of Hormuz.
- Weekly API data on oil and petroleum product inventories in the US.
- Injection dynamics into European UGS and TTF prices amidst the remaining injection season.
- Preparations for the OPEC+ meeting on September 6: signals regarding a pause in quota increases.
In summary, the oil market is balancing between two scenarios—successful financial pressure leading to the reopening of the strait and a reduction of Brent to $80–85, and escalation that could push prices back to triple-digit levels experienced in spring. The European gas market, in any case, enters the heating season with a lower safety margin than a year ago, while the energy transition gains additional momentum from record solar generation and investments in storage. For daily analytics on the energy sector, follow the Open Oil Market channel on Telegram.
