Oil Market: Brent at $88–89 Between Supply Deficit and Record Inventory Growth in the US
On Thursday morning, Brent is trading around $88 per barrel, while WTI is approximately $83, with prices having dropped more than $1 following cuts to global demand forecasts. The previous day, the international benchmark closed at $88.98, peaking at $89.5—about 24% above the levels prior to the onset of the US-Israeli military campaign against Iran at the end of February. The oil market is being driven by mixed factors:
- Supply Deficit: According to the latest monthly report from the IEA, the global oil market is missing approximately 1.8 million barrels per day in the third quarter due to the conflict in the Middle East and limited shipping through the Strait of Hormuz.
- Record Growth of US Inventories: EIA data revealed a rise in commercial crude oil inventories of 17.4 million barrels in just one week—the largest weekly increase since the start of 2023, which has tempered bullish sentiment.
- Brent-WTI Spread Widens: Disruptions in the Middle East are affecting Brent-linked barrels more severely, while US production remains insulated from the region's logistical risks.
- Speculative Positioning: Fund managers have reduced their net long positions in Brent and WTI for the second consecutive week, locking in profits amid uncertainties in negotiations.
Hormuz Crisis: US-Iran Talks Stalled, Shipping Attacks Continue
Geopolitics remain the primary pricing factor for oil and gas. Negotiations to unblock the Strait of Hormuz have stalled: Washington claims "full control" over the waterway and is increasing pressure on Tehran by expanding sanctions and a maritime blockade of Iranian ports. Meanwhile, the escalation has spread to the Red Sea: an attack by Houthi militants on a freighter in the Bab-el-Mandeb Strait resulted in the deaths of six sailors—the first casualties among crews in over a year—and US forces struck a container ship in the Gulf of Oman. However, dialogue channels are not completely closed: reports indicate that negotiations between Iran and Oman regarding the phased reopening of the strait are at an advanced stage, and these expectations are keeping Brent below $90, rather than exceeding $100. Any meaningful progress could quickly reduce the military premium, while a breakdown in contacts threatens to trigger a new surge in oil and LNG prices.
OPEC+: Final Quota Increase and Pause Until Year-End
The OPEC+ alliance approved the last quota hike in the current series at its August meeting—an increase of 188,000 barrels per day effective from September, marking the conclusion of the return of 1.65 million barrels per day of voluntary cuts from 2023. The decision is largely symbolic: actual production and exports from Gulf countries are substantially lagging behind quotas due to military risks, damaged infrastructure, and logistical constraints. Analysts' baseline scenario anticipates a pause in changes to quotas in the fourth quarter, transitioning to difficult negotiations over production bases for 2027, which are expected to be contentious in light of the UAE's exit from the organization in May. The next meeting of key participants is scheduled for September 6.
Gas Market: Europe Facing Record Low Storage Ahead of Winter
The European gas market is the second most significant topic of the day. Prices at the TTF hub, following a spike of more than 10% earlier in the week, are holding in the range of €58–62 per MWh—approximately double the levels at the start of the year. The causes of tension include:
- EU gas storage levels hover around 55–57%—approximately 22 percentage points below the five-year average and at a record low for the season since records began in 2009.
- LNG deliveries from Qatar through the Strait of Hormuz are experiencing disruptions, while competition with Asia for available shipments of liquefied natural gas intensifies.
- An accident at the Norwegian Ormen Lange field with extended repairs lasting until February 2027 will remove over 1 billion cubic meters from the market during the heating season.
- Heat in Europe is sustaining electricity demand for air conditioning, increasing gas consumption in generation.
Brussels has already lowered the mandatory storage filling target from 90% to 80% by November 1, though even this is in question given current injection rates. Commerzbank raised its gas price forecast for the year-end to €50/MWh, while Uniper expects a range of €50–60, as long as the strait remains closed. For Europe’s industry and energy sectors, this means an expensive winter and the continued presence of a risk premium in prices throughout the 2026–2027 horizon.
Sanction Pressure on Russia: New Package in the US Congress
The US House of Representatives is considering a bipartisan sanctions package aimed at Russia's energy revenues, banking sector, and networks circumventing restrictions, with threats of increased tariffs for the largest buyers of Russian energy resources. For the global oil market, this is an additional uncertainty factor: tightening secondary sanctions could reshape the flows of Russian oil and petroleum products to Asia and widen Urals discounts, while India and China continue to balance between attractive purchases and the risk of trade restrictions from Washington.
Russian Oil Products Market: Fuel Embargo Extended, Priority on Domestic Market
The domestic fuel market in Russia remains under manual control following drone attacks on refineries and a summer surge in demand. The government has extended the full export ban on automotive gasoline until January 31, 2027; restrictions on diesel fuel, marine fuel, and gas oils will remain in place until the end of August, while from September 1, direct producers of diesel will be able to restart exports. Additionally, a special procedure for ensuring fuel supply to farmers during the peak harvesting season is in effect until November 1. Authorities estimate that the market has begun to partially stabilize, although the gasoline situation remains tense in some regions. For the global oil products market, the extension of the Russian embargo means a reduction in diesel export availability and supports crack spreads at refineries in Europe, the Middle East, and Asia.
Electricity and Renewables: Renewable Sources Surpass Coal for the First Time
The global energy transition is achieving a historic milestone in 2026: according to the IEA, renewable generation is set to surpass coal for the first time and become the largest source of electricity worldwide. Global electricity demand is expected to grow by 3.6% in 2026 and by 3.8% in 2027—to about 30,700 TWh, driven by the electrification of transport and industry, air conditioning, and rapid expansion of data centers for artificial intelligence. Solar energy is expected to contribute approximately 600 TWh of output per year, surpassing wind and becoming the second-largest renewable source after hydropower. In the EU, coal's share in generation will fall below 10% for the first time in over a century, while the share of low-carbon electricity is projected to approach 76% by 2027. Demand in China is expected to grow by about 5.5%, and in India by 7%. A separate trend is energy for AI: billions in investments are flowing into storage, small modular reactors, and network infrastructure, while European generators, including nuclear, are raising their annual forecasts amid high electricity prices.
Coal: The Paradox of Energy Transition and Data Center Demand
Despite record renewables, coal demonstrates resilience where electricity demand is growing the fastest. In the US, coal generation surged by 13% last year—data centers and high natural gas prices brought coal-fired power plants back online, slowing their decommissioning. Conversely, in China and India, coal production is decreasing due to record additions of solar and wind capacity—showing synchronized declines for the first time in fifty years. Overall, global coal consumption is plateauing: the IEA forecasts a moderate decline in coal generation by 2030 while maintaining its significant role in Asia’s energy balance.
What This Means for Investors: Key Indicators for the Coming Weeks
The energy market remains a geopolitical arena. The baseline scenario expects Brent to stabilize in the range of $85–92 per barrel with the Strait of Hormuz closed, presenting asymmetric risks to the upside in case of a breakdown in negotiations and the potential for corrections towards $80 and below in the event of a breakthrough in US-Iran dialogues. Investors and fuel market participants should monitor:
- Progress in negotiations between Iran and Oman regarding the phased reopening of the Strait of Hormuz and Washington's rhetoric;
- Gas injection rates into European storage facilities and TTF dynamics ahead of the heating season;
- The OPEC+ meeting on September 6 and early signals regarding quotas for 2027;
- The fate of the US sanctions package against Russia's energy sector and India and China's response;
- Weekly EIA reports on US oil and petroleum product inventories;
- Electricity demand statistics from data centers as a new structural driver for gas, coal, nuclear, and renewables.
Energy markets are undergoing one of the most tense periods in recent years: a military premium in oil, record low gas storage in Europe, and a historic leadership change in global generation are shaping a new configuration in the energy sector, where volatility becomes the norm, and energy security is the top priority for governments and companies worldwide.
