Key Update for Wednesday Morning, July 29, 2026
- Oil. Nearby Brent futures are trading around $86–87 per barrel, while WTI is approximately $81. Both benchmarks saw a loss of about 8% on Monday, marking the most significant single-day drop in several months.
- Geopolitics. The U.S. has paused its series of nighttime strikes on Iran; Washington cites a "pause for negotiations," while Tehran has yet to confirm any concessions.
- Logistics. Net oil and petroleum product exports through the Strait of Hormuz averaged approximately 2.9 million barrels per day for the week ending July 24, down from 5.9 million b/d the previous week.
- Gas. Spot TTF rose to about $744 per thousand cubic meters, compared to an average of $532 in June — a peak 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, and the import tariff has been broadened to include diesel fuel.
Oil: Market Steps Back from War Premium
The key theme in the oil market is the speed at which geopolitical premiums are dissipating. On July 23, Brent hit a six-week high amid the twelfth consecutive nighttime attack by the U.S. on Iranian facilities and rising tensions in the Red Sea. After reports of strikes being halted, prices opened the week lower, initially dropping to $86.8, then below $85 — the first time since July 17. By Monday evening, the market partially recovered some losses, but the decline continued into Tuesday, with prices settling near three-week lows by Tuesday and Wednesday.
Fundamentally, the market is driven by three forces:
- Diplomatic Hope. The pause in strikes is interpreted by traders as a window for potential deals and as a precursor to unlocking shipping routes.
- Physical Shortage. Supplies via Hormuz remain half of normal levels, and insurance rates for ships in at-risk zones are significantly higher than pre-war levels.
- Return of Supply. The partial return of Iranian barrels to the market increases competition for Asian buyers, putting pressure on price differentials.
Investment bank analysts had previously raised their Brent forecast for 2026 to $85, anticipating prolonged disruptions in the Strait. The current de-escalation suggests that this figure might serve more as an upper than lower boundary moving forward.
Strait of Hormuz and Red Sea: A Bottleneck in Global Energy
Before the conflict, approximately a quarter of maritime oil trade and around 20% of global LNG flowed through the Strait of Hormuz. Currently, traffic has only partially resumed: tankers are primarily navigating the northern corridor along the Iranian coast, with pumping rates fluctuating week to week.
At the same time, a second route has become increasingly perilous. Yemeni Houthi fighters reported strikes on the East-West pipeline connecting Saudi Arabia’s oil fields to the port of Yanbu on the Red Sea, alongside attacks on infrastructure near Jazan. This pipeline serves as the main alternative route in case of Hormuz blockage, so any prolonged disruptions will immediately reinstate risk premiums in oil and freight pricing.
OPEC+: Quotas Increase, Actual Production Lags
Formally, the alliance continues its course towards easing restrictions. The combined quota of the “Seven” key participants was raised to 30.633 million b/d in July from 29.548 million b/d in June. However, actual production remains far from permitted levels:
- Saudi Arabia produced approximately 3.44 million b/d below its quota;
- Iraq — 2.38 million b/d below;
- Kuwait — 1.18 million b/d below;
- Russia produced 8.928 million b/d in June, falling short of its plan by 834,000 b/d;
- Kazakhstan, conversely, exceeded its quota by more than 1.15 million b/d.
The lag in production among Middle Eastern participants is driven not by discipline issues but by the physical inability to export crude. The UAE's exit from OPEC and OPEC+ as of May 1 has further reduced the manageability of the deal. The practical takeaway for the market: the alliance has accumulated significant "dormant" export potential, which could flood the market immediately after shipping normalizes — a key mid-term bearish factor for oil.
Gas and LNG: Europe Pays for Injection Delays
The European gas market is moving in tandem with oil. As of July 19, EU underground storage was filled to approximately 54% (around 57.7 billion cubic meters) — nearly 16 percentage points lower than the five-year average. Injection rates are slowing: daily additions stood at about 308 million cubic meters in June and around 270 million cubic meters in July compared to 338 million cubic meters a year ago.
Why Gas Prices Are Rising
- LNG imports in July may drop to about 6.5 million tons — the lowest in two years and about a quarter of the year-on-year decline;
- Asia is buying up available lots: for the Asia-Pacific region, this is a matter of current consumption; for the EU, it’s about stockpiling;
- Qatar is gradually restoring shipments from Ras Laffan and promises to return most of its capacities within two months after the full reopening of the strait;
- Beginning January 1, 2027, the EU's ban on importing Russian LNG through long-term contracts will take effect, and pipeline gas will be banned from September 30, 2027.
Conservative estimates suggest that by early November, EU storage could only reach about 75% capacity — close to historical lows. This maintains a premium in winter contracts and makes the European industry structurally vulnerable for another heating season.
Coal: Correction After Escalation
The coal market is absorbing the oil and gas volatility with a lag. In mid-July, European energy coal indices rose above $118 per ton following oil and gas prices; however, last week, prices corrected downward in Europe, China, and Australia. Stockpiles in the nine largest ports in China remain around 29 million tons, limiting growth potential.
The outlook for Russian exporters is mixed. Throughput at Black and Azov Sea ports grew by 21.5% in the first half of the year, reaching 13.9 million tons, supporting overall exports. However, sanctions, high railway tariffs, and a strengthening ruble are squeezing margins, while competition for Turkish and Asian markets intensifies. The long-term outlook is set 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 a status of reserve sources.
Electricity and Renewables: Record Solar Generation and High Evening Costs
In June, solar power plants accounted for approximately 25% of electricity generation in the European Union 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%, while solar generation peaked at 37.5%.
The flip side of these records is the growing volatility in electricity prices. A deficit in storage systems means that daytime surpluses are lost, while evening peaks are met with expensive gas and coal generation. An additional factor is restrictions on French nuclear plants due to river water temperatures during heat waves. For investors, this shifts the focus from commissioning new renewable capacities to improving grid flexibility, battery storage, and demand response.
Russia: Fuel Market, Refineries, and Import Tariffs
The domestic petroleum product market remains under tight control. The active package of measures includes:
- A complete ban on gasoline exports, extended until the end of 2026;
- Restrictions on the export of diesel fuel, marine fuel, aviation kerosene, and gasoil;
- A reduction in mandatory exchange sale standards for gasoline from 15% to 10% from July 1 to September 30;
- Maximum capacity utilization at refineries, reduction of current maintenance periods, and postponement of planned maintenance;
- An import damping mechanism expanded to include gasoline from July and, after amendments to the Tax Code, diesel fuel and middle distillates (until July 2027);
- Zero import tariffs and increased supplies from EAEU countries.
A mechanism for accounting direct contracts in calculating exchange standards is also being prepared — authorities aim to reduce the risk of localized shortages in regions.
Export of Russian Oil: Discounts vs. Budget Needs
Physical volumes of Russian oil exports are near year-to-date highs, but the pricing situation is deteriorating. The Urals discount rose by about $3 per barrel in early July compared to June; FOB conditions in Baltic ports set the spread against Dated Brent in the range of $25–28 per barrel, compared to a five-year average of approximately $19.8. The average price used for calculating hydrocarbon extraction tax (NDPI) settled around $50.4 per barrel in July, down from $63.5 in June.
Given that the budget is based on an Urals price of around $59 per barrel, and the deficit has already significantly exceeded the annual target, July's price decline will impact treasury revenues in August. The return of Iranian barrels to the Indian market intensifies competition and increases the likelihood of further widening discounts.
Market Participants Should Monitor Upcoming Sessions
- U.S.-Iran Negotiation Format: Confirmation of direct contacts could drive Brent into the $75–80 range.
- Pumping Dynamics Through Hormuz: A return to 5–6 million b/d would signal the end of the supply crisis.
- Houthi Attacks on Saudi Infrastructure: Strikes on Yanbu and the East-West pipeline immediately restore risk premiums.
- Gas Injection Rates in EU Storage: A lag in August could imply an expensive winter and elevated TTF prices.
- Restoration of LNG Shipments from Qatar: A key factor for the balance between Europe and Asia.
- OPEC+ Decisions on September Quotas and members' actual ability to comply.
- Russian Gasoline and Diesel Exchange Quotes amid extended export bans and import damping measures.
The conclusion for investors and market participants in the energy sector: oil is entering a price normalization phase while logistics issues remain abnormal, gas continues to be the most pressured segment of global energy, coal is trading sideways, and electricity generation increasingly relies on network flexibility rather than installed capacity. Any of these factors could shift the entire configuration of the commodity and energy markets in a single session.
