Oil Market: Brent Stabilizes at $90 After Best Month Since Spring
The global oil market concluded July on a high note. In the aftermath of Friday’s trading, a barrel of Brent climbed by 1.3% to $90.12, while U.S. WTI rose by 1.5% to $84.67. Over the month, the North Sea benchmark saw an approximate increase of 24%, with WTI rising by 21%—the best performance since March when escalating tensions around Iran first pushed prices into triple-digit territory. Russian Urals is valued around $85 per barrel, and the discount to Brent has narrowed amid a supply deficit in the global market.
Key drivers for oil prices at the week's start include:
- Geopolitical Premium: The blockade of the Strait of Hormuz and continuing military confrontations around Iran maintain a risk premium in pricing of several dollars;
- Tightening Actual Supply: Exports from the Persian Gulf are navigating roundabout routes with limited capacity, with a portion of Iranian volumes effectively dropped from the market;
- Sustained Demand: Unusual heat in the Northern Hemisphere supports electricity and fuel consumption, with refineries operating at high capacity during the peak automobile season.
Analysts' consensus among leading investment banks has raised the average Brent price forecast for 2026 to $85 per barrel. The range of weekly fluctuations remains broad: at the end of July, prices swung between $84 and $100, reflecting the oil market's sensitivity to every bit of news from the Middle East.
OPEC+: Final Increase in Quotas and Strategic Pause
The central event of the weekend was the OPEC+ “seven” meeting on August 2. Key decisions from the alliance include:
- From September, oil production quotas will increase by an additional 188,000 barrels per day—marking the end of a phased cancellation of the voluntary cut of 1.65 million bpd that has been in effect since 2023;
- After the September increase, the alliance will pause further production hikes to assess supply and demand balance;
- Restrictions of roughly 2 million bpd, implemented in 2022, remain in place, with decisions regarding their allocation postponed.
From February to August 2026, the total quota of the alliance has increased by approximately 940,000 bpd—a volume comparable to Oman’s production. The format of the alliance has changed: following the UAE’s exit from OPEC and OPEC+ on May 1, decisions are made by the “seven”—Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman. The alliance's cautious strategy is understandable: with the Strait of Hormuz blocked, the physical ability to increase exports for some members is limited, and a paper increase in quotas does not lead to a proportionate rise in supply.
Strait of Hormuz: Tehran Rejects Unlocking, Negotiations with Oman Near Conclusion
The geopolitical backdrop remains a decisive factor for the entire energy sector. On Sunday, Tehran officially denied reports of a resumption of shipping through the Strait of Hormuz, labeling them as inaccurate. Meanwhile, the Iranian Foreign Minister stated that consultations with Oman regarding a joint shipping management mechanism in the waters are nearing completion—this being the first tangible signal of a possible de-escalation in recent weeks.
The stakes for the global market are exceptionally high: before the crisis, about one-fifth of global oil supplies passed through the strait, and Europe received up to 12-14% of imported LNG from Qatar via this route. Investors are also closely monitoring the discussed idea in Washington regarding a land blockade of Iran—its implementation could trigger a new surge in oil and gas prices. Conversely, any progress in negotiations could quickly deflate part of the geopolitical premium: experts estimate that with the signing of a peace agreement, Brent prices could revert to around $70.
European Gas Market: Stocks at Five-Year Low Ahead of Winter
The European gas market remains the most vulnerable segment of the global energy landscape. Prices at the TTF hub rose by approximately 55% in July, remaining consistently above $500 per thousand cubic meters. The causes of tension are of a structural nature:
- As of early August, the fill level of underground gas storage (UGS) in the EU slightly exceeds 56%—the lowest for this time of year since 2021 and 18 percentage points below the five-year average;
- Following the cold winter of 2025-2026, the withdrawal season ended with storage levels below 28%, and compensating for the lost volumes has been unsuccessful;
- To meet target levels ahead of the heating season, net injections must reach at least 68 billion cubic meters; however, less than half of the plan has been fulfilled up to now;
- Europe is losing the price competition to Asia for available LNG cargoes, while the July heat increased gas consumption for electricity generation for cooling systems.
Gas injection rates in July were among the lowest recorded historically. If the trend does not reverse in August-September, the winter of 2026-2027 could prove the most challenging for European energy since the crisis of 2022—with corresponding repercussions for industry, electricity generation, and inflation in the eurozone.
LNG and Asia: $1 Billion Additional Costs and a Shift to Coal
Five months of conflict in the Middle East have cost South Asian countries over $1 billion in additional LNG import expenses. Rising logistics costs and rerouting have hit Pakistan and Bangladesh the hardest, where gas supply interruptions and widespread electricity outages are being reported. Spot prices for liquefied gas in Asia have more than doubled during the crisis, forcing importers to reassess their fuel mix in favor of coal. Meanwhile, China is reducing re-exports of Arctic LNG volumes, redirecting them to replenish its own reserves ahead of the heating season amid unusual heat and record electricity demand.
Coal: The Quiet Beneficiary of the Gas Crisis
The coal market has emerged as a clear winner from high gas prices. Major Asian economies are ramping up coal generation: South Korea has increased output from coal-fired power plants by nearly 40%—to the highest since 2019, while Japan has recorded an 11% rise. Energy coal imports are increasing across all directions: South Korea nearly doubled its purchases of Russian coal from January to May, significantly boosting imports from Australia as well. Prices at the European ARA hub are holding in the range of $118-$124 per ton, and the index for Australian metallurgical coal has surpassed $215. For exporters—Indonesia, Australia, Russia, and South Africa—the market environment remains favorable: sustained demand from Asia ensures stable sales and supports prices.
Power Generation and Renewables: Renewable Energy Surpasses Coal Globally
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