Oil Market: Brent Near $92, WTI Around $85 — Pause After Rally
Oil quotes ended Monday down more than 2%: Brent closed near $92 per barrel, while WTI is trading around $85. This is the first significant correction after two weeks of growth, during which the market priced in stalled negotiations over the Strait of Hormuz and attacks on vessels in the Persian and Oman Gulfs. Relative to the level preceding the war (around $71 for Brent at the end of February), the geopolitical risk premium still stands at about 30%.
The key factors affecting price dynamics today include:
- Sanctions factor: The market awaits specifics on new U.S. restrictions — tightening pressure on buyers of Iranian oil could reduce supply, but it also heightens the risk of escalation in the Strait.
- Physical flows: Transit through the Strait of Hormuz remains significantly below pre-war levels of ~110 vessels per day; tracking data shows that on certain days, only a handful of passages are recorded, while hundreds of tankers wait offshore.
- EIA Forecast: The U.S. Energy Information Administration expects the average Brent price to be around $85 in the third quarter and approximately $87 by the end of 2026; a return to pre-war production levels in the Middle East is not anticipated before early 2027, with a continued drop of about 0.6 million barrels per day expected until the end of next year.
- Inventories: The API report is due out on Tuesday evening, with EIA data following on Wednesday; commercial oil inventories in the U.S. remain below the five-year average, which supports the temporary market structure.
“Economic Pariah”: U.S. Shifts Conflict with Iran to Financial Arena
On August 24, U.S. Treasury Secretary Scott Bessent presented a campaign that the administration has termed “economic D-Day.” Its aim is to “cut off all economic lifelines” of the Iranian regime and ensure the resumption of shipping through the Strait of Hormuz without a new round of airstrikes. Key elements of the package include:
- Sector-specific sanctions definitions in five areas deemed “vital” for Tehran: digital assets, technology, gold, aviation, and maritime transport.
- More than 60 legal entities, individuals, and ships included on the OFAC lists — including a network of brokers and a “shadow fleet” operating through the UAE, Hong Kong, China, Singapore, and Switzerland to transport Iranian oil.
- Expansion of the risk of secondary sanctions for any counterparties of Iran: countries will be given a specific deadline to wind down relations, followed by unilateral measures.
- A promise of major sanctions action against an unnamed financial institution by the end of the week.
The toughest blow has been delayed for now: Bessent called the announcement a “warning shot,” while President Trump has personally called world leaders with “specific asks.” Experts estimate that the risk zone includes China, India, Turkey, Iraq, and the UAE. Tehran has responded with a promise of a “seismic” response, and the Iranian Ministry of Finance has stated its full readiness for new restrictions. A critical question for the oil market is whether Washington will impose sanctions on Chinese banks: China remains the largest buyer of Iranian oil, although the maritime blockade has already reduced its imports from Iran to about 340,000 barrels per day, down from 1.14 million in March.
Strait of Hormuz: Attack on Tanker and Negotiations via Oman
Early on Tuesday, the British UKMTO center reported that an oil tanker was hit by an unidentified projectile approximately nine nautical miles off the coast of Oman: the engine room was damaged, but the crew remained unharmed, with environmental consequences being assessed. The incident confirms that despite U.S. claims of “full control” over the Strait, maritime safety has not been restored.
A diplomatic track remains intact. Iran and Oman continue to discuss a protocol for maritime management, and indirect contacts between Tehran and Washington are taking place through Pakistan. However, the positions of the parties are rigid: Iran insists on the lifting of the U.S. maritime blockade and recognition of its right to regulate (and tariff) the passage of vessels, while Washington insists on the freedom of navigation. A memorandum from June 17 already collapsed once in July, so the market is assessing the likelihood of a quick breakthrough with caution.
OPEC+: Quotas Restored, Physical Production Not
The September quota increase of 188,000 barrels per day concluded the reversal of voluntary cuts for 2023 amounting to 1.65 million barrels per day. Seven countries in 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 until the end of the year. The next decision regarding October is expected on September 6.
A crucial 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 as soon as flows normalize, the alliance will have to manage not a deficit, but a potential surplus.
Gas and LNG: TTF Above €65/MWh Amid Slow Injection Rates in UGS
The European gas market remains the most strained segment of the energy sector. September futures at the TTF hub are trading near €65/MWh — the highest since January 2023 and more than 20% above levels two weeks ago. The reasons include:
- Qatari LNG Shortage: Loadings from the Persian Gulf through the Strait of Hormuz are sporadic, with QatarEnergy not rushing to return to a full schedule.
- Low Stocks: EU UGS were only 61.4% full as of August 17, down from nearly 74% a year earlier; the target level for November 1 had to be lowered from 90% to 80%.
- Heat and Hydropower: Abnormal temperatures increased demand for gas for generation, while record-low hydro generation intensified pressure on gas-powered plants.
- Competition with Asia: Spot LNG JKM is holding around $21+/MMBtu; Japan, Korea, and Taiwan are partially hedging risks with coal.
Against this backdrop, the U.S. Henry Hub remains below $3/MMBtu amid record production in the U.S. of about 122.5 billion cubic feet per day — the spread between American and global gas continues to justify a wave of investments in export LNG terminals.
Power Sector 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, hydro generation in the EU fell to its lowest levels in at least a decade, France reduced nuclear capacity due to overheating rivers, and intraday prices in France and Germany during evening hours exceeded €300/MWh, with Southeast Europe reaching €700/MWh. However, the grids held up thanks to record solar generation: on peak hot days, solar plants generated 17% more than usual. The main conclusion from regulators is that the deficit occurs during evening hours, thus accelerating investments in storage: the UK is subsidizing 7.6 GW of long-term battery projects, while Spain could triple its storage capacity by year-end.
In the U.S., wind and solar power in the first half of the year surpassed both coal and nuclear combined for the first time, contributing 20% of total generation; solar generation increased by 21%, hydro by 9%, and wind by 6%. Demand from data centers remains a growth driver, although Texas has paused approvals for new sites.
Coal: Newcastle Around $130 Per Ton, Asia Hedging LNG Risks
Energy coal at Newcastle has stabilized around $130/ton after averaging $144 in June. Pressure on prices is coming from cooling demand in China due to a rainy summer and increased domestic production in India (+7.5% year-on-year in July, to 69.75 million tons). Support comes from energy security: Japan, South Korea, and Taiwan are ramping up coal purchases as a hedge against LNG supply disruptions. The consensus for Q3 is around $130/ton with a gradual decline to $120 by 2027; coking coal remains near $240/ton amid restrictions in China.
Russia: Oil Exports to Asia at Records, Domestic Fuel Market in Manual Mode
Russian oil exports are being redirected to the East. In July, China purchased 50% of Russian 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 Urals price in July was around $60 per barrel — above the new G7 and EU ceiling of $44.10, effective since February. Chinese purchases of Russian sea consignments increased by 28% month-over-month: refineries are replacing lost Middle Eastern barrels.
The domestic fuel market is experiencing a second wave of crisis:
- The gasoline export ban has been extended until January 31, 2027, while the diesel limitation remains in place until September 1, with no decision yet made regarding an extension for producers;
- Deputy Prime Minister Alexander Novak reported the return of several refineries to operation after repairs and confirmed that the federal headquarters plans to meet twice a week;
- The deficit is being covered by imports (Indian gasoline has entered the market) and the production of ecological classes of fuel K-2–K-4, which will not exceed 10%;
- In the south, including Krasnodar Krai, oil companies are imposing fuel release limits during the height of the resort season;
- A ban on the export of aromatic hydrocarbons — a raw material for high-octane components — is being discussed.
What to Watch on August 26: Calendar for Energy Market Participants
- Details of U.S. sanctions — a list of countries receiving "deadlines" and the announced decision regarding a financial institution.
- Investigation of the attack on the tanker off Oman's coast and the response from insurers and shipowners.
- Progress in negotiations between Iran and Oman concerning the maritime protocol in the Strait of Hormuz.
- Weekly API data on U.S. oil and petroleum product inventories.
- Dynamics of European UGS injections and TTF quotes amid the remaining injection season.
- Preparation for the OPEC+ meeting on September 6: signals of a pause in quota increases.
In conclusion: the oil market is balancing between two scenarios — successful financial pressure leading to the reopening of the Strait and a decline in Brent to $80–85, and escalation that would push quotes back to triple-digit values from spring. The European gas market, in any case, enters the heating season with a lower margin of safety than a year ago, while the energy transition gains additional momentum from record solar generation and investments in storage. Daily analytics on the energy market can be found in the Open Oil Market Telegram channel.
