Oil Market: Hormuz Diplomacy Hits Prices
The oil market has experienced one of the sharpest corrections of the year. Following the July rally, when Brent surged above $90 per barrel amid the blockade of the Strait of Hormuz, news of a potential temporary agreement between Iran, Oman, and the United States has reversed the trend. The parties are discussing a 60-day plan to split shipping flows: tankers heading to the Persian Gulf will follow Iranian routes, while vessels departing the Gulf will take routes near Oman, with no transit fees. Against this backdrop:
- Brent was trading in a range of $78.5–79.7 per barrel by the morning of August 6, down more than 5% from the previous session;
- WTI fell to $74.8–75.2 per barrel;
- price consolidation is happening within a narrow corridor of $78.6–81.3 after a sharp decline on August 3–4;
- analysts' average forecast for Brent prices for the entire year of 2026 remains above $85 per barrel — the market is factoring in a geopolitical risk premium.
The President of the United States publicly stated that there has been "significant progress" in negotiations and expressed readiness to ease some sanctions against Iranian oil exports and to pull the military fleet away from Iranian shores in the event of a deal. However, Tehran officially insists that it is only discussing shipping arrangements with Oman, and not directly with Washington, leaving room for new plot twists. For the oil and petroleum products market, the key question remains: will de-escalation solidify, or will tensions in the Persian Gulf return as early as September.
OPEC+: The End of the Production Increase Cycle
The OPEC+ alliance has confirmed that starting in September, seven member countries, including Russia and Saudi Arabia, will raise production quotas by an additional 188,000 barrels per day. This decision marks the end of a phased return of 1.65 million b/d of voluntary cuts that began earlier this year. Key details:
- the total allowed production level for the alliance will reach 36.206 million b/d;
- Saudi Arabia and Russia will both receive equal increases of 62,000 b/d, to 10.478 million and 9.949 million b/d respectively;
- further increases in quotas are not planned until the end of 2026, according to sources within the organization;
- actual production in several countries is falling short of quotas due to disruptions in export infrastructure — attacks on facilities in Russia and tensions in the Persian Gulf are holding back a full recovery in supply.
The next OPEC+ ministerial meeting is scheduled for early September — the market will pay close attention to the alliance's rhetoric regarding 2027, especially in light of the possible normalization of the situation around the Strait of Hormuz.
European Gas Market: Record Low Inventories 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, underground gas storage (UGS) facilities in the EU are only 57% full, which is below the previous low of 2021 and significantly lags behind the European Commission's target of 90% by the start of the heating season. Key factors contributing to the shortage include:
- reduced LNG supplies through the Strait of Hormuz — estimates suggest that up to 20% of global liquefied gas volumes have temporarily dropped out of logistics;
- a 7% year-on-year decline in LNG imports to Europe in August;
- spot prices at the TTF hub have stabilized at around $696 per thousand cubic meters compared to an average of $626 in July — a nearly 1.5-fold increase compared to August of last year;
- the contribution of wind generation to Europe's energy balance decreased to 10% in early August, down from 14% a year earlier, which further increases pressure on gas generation.
Analysts warn that if the current injection dynamics persist, 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 a risk of energy price spikes in 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 possible easing of restrictions against Iranian oil exports directly to progress concerning the Strait of Hormuz, while the sanctions regime against Russian energy resources remains unchanged. Concurrently, attacks on refining and export infrastructure continue to impact actual oil and petroleum product delivery volumes from Russia and Gulf countries, which analysts at Kpler cite as one of the reasons for delaying the forecast recovery of production in the Middle East from September 2026 to early 2027. For global traders and energy market participants, the scenario remains twofold: sustained de-escalation could bring oil back to a range of $70–75, while a breakdown in negotiations or a new attack on infrastructure could push Brent back to $90 and above.
Russian Fuel Market: Export Restrictions Remain in Place
Within Russia, authorities continue to curb fuel shortages through a set of administrative measures. Key decisions over the past few weeks include:
- a complete ban on the export of gasoline, diesel fuel, marine fuel, and gasoil for all producers has been extended until the end of September, effectively until the end of 2026 for gasoline;
- starting September 1, partial easing of restrictions is planned for diesel and gasoil from direct producers;
- retail prices for gasoline have risen nearly 14% since the beginning of the year, while diesel prices have increased by almost 15%, significantly outpacing overall inflation;
- imports of petroleum products have been initiated to stabilize the domestic balance, and special pricing regulations for government fuel procurement have been suspended until the end of the year.
Experts note that external markets — particularly Europe and the U.S., where the diesel shortage has already affected stock prices — are bearing the brunt of Russia's export ban, while Asia, with its own refining capabilities, feels the impact less severely.
Asian Demand: China and India Increasing Purchases
The largest Asian importers continue to shape the balance of the global oil and gas market. China maintains its status as the leading buyer of Russian and Middle Eastern oil while simultaneously increasing its domestic production and investment in field exploration. India continues to benefit from favorable procurement terms for Urals-grade oil and is simultaneously developing deep-water exploration programs to reduce long-term import dependency. Both countries remain key demand drivers amid cooling consumption in developed economies.
Energy Transition: Renewables Prepare to Overtake Coal
According to the International Energy Agency (IEA), by 2026, renewable energy sources (RES) are expected to surpass coal in the global electricity generation mix for the first time. Solar generation is expected to add around 600 TWh of power per year and become the second most significant source of "green" electricity after hydropower. Key points include:
- the gas crisis caused by supply disruptions in the Strait of Hormuz has accelerated the transition of several countries to solar generation as a way to reduce dependence on imported fuels;
- the global pace of new solar capacity additions could slow in 2026 for the first time in 25 years due to saturation of key markets and changes in regulatory policies;
- CO2 emissions from the energy sector are forecasted to rise by 1% in 2026 due to a temporary increase in coal generation amid high gas prices, but stabilization is expected in 2027.
Coal: Temporary Comeback Amid High Gas Prices
Rising natural gas prices have rekindled interest among energy companies in coal-generated electricity as a backup energy source. In the Asia-Pacific region, where the primary demand for thermal coal is concentrated, consumption remains near record levels. Despite long-term decarbonization strategies, coal continues to serve as a safety net for energy systems against gas supply disruptions, especially during peak usage periods in the short term.
End of the Day: What to Expect for Energy Sector Investors
The fuel and energy complex enters the weekend with a mixed set of signals. The oil market is showing signs of de-escalation due to Hormuz diplomacy, but geopolitical risks remain high and could return at any moment. The European gas market, on the other hand, is entering a phase of structural tension ahead of winter, creating conditions for increased electricity price volatility. The Russian fuel market maintains administrative control, while the global energy transition is gaining momentum, despite a temporary renaissance in coal generation. For participants in the oil and gas sector, oil companies, refineries, renewable energy investors, and petroleum traders, the key indicators for the coming weeks will include the outcomes of negotiations regarding the Strait of Hormuz, the pace of gas injections into European storage, and OPEC+ decisions at the alliance's September meeting.
