Oil Market: Brent between $84 and $87 Amid Attacks on Tankers
Oil prices are displaying increased volatility. Following a nearly 5% drop at the beginning of the week to $84 per barrel of Brent, the market rebounded on Wednesday, with September Brent futures rising above $87 and WTI trading around $82. Several events contributed to this upward momentum:
- Attacks on Tankers in the Strait of Hormuz: Iran's Revolutionary Guard announced that three oil tankers, which were traveling on an "unapproved" route, had been targeted. Transit between the Persian and Oman Gulfs remains severely restricted, with portions of the routes mined.
- Strikes on Military Installations: Iran launched missile attacks on American bases in the region, while the U.S. and Saudi Arabia conducted joint operations in Iraq. Iraqi oil exports are declining due to shipping disruptions.
- Logistics Restructuring: Saudi Arabia is redirecting some supplies to bypass hotspots, with shipments through the Suez Canal significantly increasing, while Houthis threaten shipping in the Bab-el-Mandeb Strait.
Several analysts do not rule out Brent reaching $100 per barrel in the event of further escalation. Counteracting factors include a slowdown in global oil demand, a strong dollar, and sell-offs in Asian stock markets.
OPEC+: The 'Seven' Completes Production Recovery
The OPEC+ alliance, in its new composition sans the UAE, which left the organization in May, continues its strategy of gradual supply enhancement. For August, the 'Seven's' quotas (Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, Oman) have been increased by 188,000 barrels per day, bringing the total target level to 36 million b/d. The meeting on August 2 is expected to confirm the final step — an additional +188,000 b/d for September, effectively ending the voluntary cap of 1.65 million b/d. From February to August, the total quota has increased by approximately 940,000 b/d. However, actual production from several participants significantly lags behind permitted levels due to the Middle Eastern conflict, which moderates the impact of quota increases on market balance.
Gas Market: TTF Nearing March Highs, Europe's Gas Storage at Only 55%
The European gas market is entering a high-risk zone ahead of the heating season. TTF hub prices reached €64/MWh (approximately $750 per thousand cubic meters) at the end of July — a peak not seen since mid-March. Key issues facing the EU include:
- Record Low Storage Levels: The EU's gas storage is filled to around 55.3% — the lowest for this date since 2021 (last year it was 76.2%, and in 2024 it is expected to be 83.7%).
- Slower Injection Rates: Daily storage replenishment rates are 20% lower than last year; to meet the 90% target by winter, a net injection of at least 68 billion cubic meters is required.
- LNG Shortage: Daily imports of liquefied natural gas in July fell to a 22-month low as Asia was purchasing available volumes amid the Middle Eastern crisis and supply risks from the Persian Gulf.
- Heat and Electricity Demand: Extreme temperatures in Europe have increased gas-fired power generation to meet air conditioning system demands.
Forecasts indicate that storage levels may not even reach 75% by the start of winter, laying the groundwork for high price volatility in the fourth quarter. Meanwhile, a new daily record for pipeline supplies of Russian gas to China has been set in the eastern direction.
