Key Highlights for the Morning of Wednesday, July 29, 2026
- Oil. Front-month Brent futures are trading around $86–87 per barrel, while WTI is approximately $81. On Monday, both benchmarks declined by around 8%, marking the most significant one-day drop in several months.
- Geopolitics. The U.S. has suspended a series of nighttime strikes on Iran; Washington is referring to a "pause for negotiations," but Tehran has yet to confirm any concessions.
- Logistics. Net oil and petroleum product exports through the Strait of Hormuz averaged about 2.9 million barrels per day for the week ending July 24, compared to 5.9 million barrels per day the previous week.
- Gas. Spot TTF has risen to approximately $744 per thousand cubic meters, up from ~$532 on average in June, the highest since December 2022.
- Electricity and Renewables. Solar generation has, for the first time, accounted for around 25% of electricity production in the EU, surpassing nuclear, gas, and wind.
- Russia. The ban on gasoline exports has been extended until the end of 2026, and the import price cap has been expanded to include diesel fuel.
Oil: Market Removes War Premium
A key theme for the oil market is the speed at which the geopolitical premium is dissipating. On July 23, Brent hit a six-week high, bolstered by the twelfth consecutive nighttime attack by the U.S. on Iranian targets and the escalation in the Red Sea. Following the reports of the suspension of strikes, prices opened the week with a sharp decline: first to $86.8, then below $85—marking the first time since July 17. By Monday evening, the market regained some losses, but a decline continued on Tuesday, and by Tuesday to Wednesday, oil held near three-week lows.
Fundamentally, the market is being influenced by three forces:
- Diplomatic Hope. The pause in strikes is interpreted by traders as an opening for negotiations and a precursor to the unlocking of shipping routes.
- Physical Shortage. Supplies through Hormuz remain half of the normal levels, and insurance rates for vessels in the risk zones are significantly higher than pre-war levels.
- Returning Supply. The partial reintroduction of Iranian barrels onto the market intensifies competition for Asian buyers and exerts pressure on differentials.
Analysts from investment banks had previously raised their Brent forecast for 2026 to $85, anticipating prolonged disruptions in the Strait. The current de-escalation suggests this target is more likely an upper bound than a lower limit.
Strait of Hormuz and Red Sea: The Bottleneck of the Global Energy Sector
Prior to the conflict, roughly a quarter of the world's marine oil trade and about 20% of global LNG passed through the Strait of Hormuz. Today, movement has only partially resumed: tankers are primarily navigating the northern corridor along the Iranian coast, and pumping rates fluctuate weekly.
Concurrently, a second route has become more contentious. Yemen's Houthis announced an attack on the East-West pipeline, connecting Saudi Arabia's oil fields with the Yanbu port on the Red Sea, as well as attacks on infrastructure near Jazan. This pipeline serves as the main bypass in case Hormuz is blocked; therefore, any prolonged disruptions in its operation will immediately reintroduce risk premiums into oil and freight pricing.
OPEC+: Quotas Increase, Production Lags
Formally, the alliance continues to ease restrictions. The collective ceiling for the "seven" key participants was raised to 30.633 million barrels per day in July, up from 29.548 million barrels per day in June. However, actual volumes remain far from permitted levels:
- Saudi Arabia produced approximately 3.44 million barrels per day below its quota;
- Iraq — 2.38 million barrels per day below;
- Kuwait — 1.18 million barrels per day below;
- Russia produced 8.928 million barrels per day in June, lagging behind its plan by 834,000 barrels per day;
- Kazakhstan, conversely, exceeded its quota by more than 1.15 million barrels per day.
The underperformance of Middle Eastern participants is attributed not to discipline but to the physical inability to export crude. The UAE's exit from OPEC and OPEC+ on May 1 further reduced the management capabilities of the agreement. The practical takeaway for the market is that the alliance has accumulated considerable "dormant" export potential, which will surge onto the market immediately after shipping normalizes—this is the primary medium-term bearish factor for oil.
Gas and LNG: Europe Pays for Delayed Injection
The European gas market is moving inversely to oil. As of July 19, underground storage facilities in the EU were approximately 54% full (around 57.7 billion cubic meters) — nearly 16 percentage points below the five-year average. Rates of injection are slowing: in June, daily replenishment was about 308 million cubic meters; in July, it was around 270 million cubic meters, compared to 338 million cubic meters a year prior.
Why Gas Prices are Rising
- LNG imports in July may fall to approximately 6.5 million tons—the lowest in two years and about a quarter down year-on-year;
- Asia is buying up available cargoes: for the Asia-Pacific region, it's a matter of current consumption; for the EU, it's about reserves;
- Qatar is gradually restoring shipments from Ras Laffan and promises to return a significant portion of its capacity within two months after the full reopening of the strait;
- From January 1, 2027, the EU's ban on imports of Russian LNG under long-term contracts will come into force, and pipeline gas will follow suit on September 30, 2027.
Conservative estimates suggest that by early November, EU underground storage may only reach ~75% capacity—close to historical lows. This keeps a premium in winter contracts and renders European industry structurally vulnerable for another heating season.
Coal: Correction Following Escalation
The coal market reacts to oil and gas volatility with a lag. In mid-July, European energy coal indices rose above $118 per ton, driven by oil and gas; however, last week prices corrected downwards in Europe, China, and Australia. Stocks at the nine largest ports in China remain around 29 million tons, limiting growth potential.
For Russian exporters, the picture is mixed. Transshipments via the Black and Azov Sea ports increased by 21.5% in the first half of the year to 13.9 million tons, supporting overall exports. However, sanctions, high railway tariffs, and a strengthening ruble are squeezing margins, with competition for the Turkish and Asian markets intensifying. Long-term guidance is provided 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 backup source status.
Electricity and Renewables: Record Solar Generation and High Evening Prices
In June, solar power plants provided around 25% of electricity generation in the European Union for the first time, surpassing nuclear generation, gas, and wind; 18 EU countries set monthly records. On certain days, the share of renewables in Germany approached 74%, with solar generation nearing 37.5%.
The flip side of these records is increasing volatility in electricity prices. The lack of energy storage systems leads to day-time surpluses being lost, while peak evening demands are met with expensive gas and coal generation. An additional factor is restrictions on French nuclear power plants due to river water temperatures during heat waves. For investors, this shifts the focus from adding new renewable capacities to grid enhancements, battery storage, and flexible demand.
Russia: Fuel Market, Refineries, and Price Caps
The domestic petroleum products market remains under manual control. The current package of measures includes:
- A complete ban on gasoline exports, extended until the end of 2026;
- A ban on exporting diesel fuel, marine fuel, jet fuel, and gas oils;
- A reduction in mandatory gasoline exchange sale norms from 15% to 10% for the period from July 1 to September 30;
- Maximal refinery utilization, shortened maintenance periods, and postponement of scheduled repairs;
- An import price cap that has been extended to gasoline from July and subsequently to diesel fuel and middle distillates (for a period until July 2027);
- A zero import duty and increased supplies from EAEU countries.
A mechanism is also being developed to account for direct contracts in calculating exchange norms—authorities aim to reduce the risk of local shortages in regions.
Russian Oil Exports: Discounts Versus Budget
Physical volumes of Russian oil exports are near their highest levels since the beginning of the year, but the price component is deteriorating. The Urals discount increased by about $3 per barrel in the first half of July compared to June; on an FOB basis at Baltic ports, the spread to Dated Brent was assessed in the range of $25–28 per barrel against a five-year average of approximately $19.8. The average price used to calculate the mineral extraction tax in July hovered around $50.4 per barrel, down from $63.5 in June.
Considering the budget is based on Urals at about $59 per barrel, and the deficit already significantly exceeds the annual target, the decline in prices observed in July will impact budget revenues in August. The return of Iranian barrels to the Indian market increases competition and raises the likelihood of further discount expansions.
What Energy Market Participants Should Monitor in Upcoming Sessions
- U.S.-Iran Negotiation Format: Confirmation of direct contacts could push Brent into the $75–80 range.
- Pumping Dynamics Through Hormuz: A return to 5–6 million barrels per day would signal the end of the supply crisis.
- Houthi Attacks on Saudi Infrastructure: Strikes on Yanbu and the East-West pipeline would instantly reintroduce risk premiums.
- Gas Injection Rates to EU Storage: Any lagging behind the schedule in August indicates an expensive winter and high TTF.
- Recovery of LNG Shipments from Qatar: This is a key factor for balancing Europe and Asia.
- OPEC+ Decisions on September Quotas and actual capabilities of participants to fulfill them.
- Russian Exchange Prices for Gasoline and Diesel against the backdrop of extended export bans and price caps.
The conclusion for investors and participants in the energy market: oil is entering a phase of price normalization amid continued logistical abnormalities, gas remains the most strained segment of global energy, coal is trading in a sideways market, and electricity increasingly depends on grid flexibility rather than installed capacity. Any of the aforementioned points has the potential to change the entire configuration of the raw materials and energy market in a single session.
