Oil Market: Brent around $92, WTI around $85 — Pause After Rally
Oil prices fell more than 2% on Monday: Brent closed near $92 per barrel, while WTI trades around $85. This marks the first significant correction after two weeks of gains, during which the market priced in stalled negotiations regarding the Strait of Hormuz and attacks on vessels in the Persian and Oman Gulfs. Compared to the level before the war (around $71 for Brent at the end of February), the geopolitical risk premium still stands at approximately 30%.
Key factors influencing price dynamics today:
- Sanctions Factor: The market awaits concrete details regarding new US restrictions — increasing pressure on buyers of Iranian oil could reduce supply but simultaneously raises the risk of escalated tensions in the Strait.
- Physical Flows: Transit through the Strait of Hormuz remains significantly below pre-war levels of around 110 vessels per day; tracking data shows that on certain days there are only one to several dozen passages, while hundreds of tankers await offshore.
- EIA Forecast: The US Energy Information Administration expects an average Brent price of around $85 in the third quarter and approximately $87 for the year-end 2026; a return of Middle Eastern production to pre-war levels is not expected before early 2027, with a projected reduction of about 0.6 million barrels per day lasting until the end of next year.
- Inventories: The API report will be released Tuesday evening, followed by EIA data on Wednesday; US commercial oil inventories remain below the five-year average, supporting the market's temporary structure.
"Economic Outcast": US Moves Conflict with Iran into Financial Realm
On August 24, US Treasury Secretary Scott Bessent introduced a campaign that the administration has dubbed "Economic D-Day." The aim is to "cut off all economic lifelines" to the Iranian regime and to secure the resumption of shipping through the Strait of Hormuz without a new round of airstrikes. Key elements of the package include:
- Sectoral sanctions targeting five areas deemed "vital" for Tehran: digital assets, technology, gold, aviation, and maritime transportation.
- Over 60 individuals and entities, as well as vessels, added to the OFAC lists, including a network of brokers and a "shadow fleet" operating through the UAE, Hong Kong, China, Singapore, and Switzerland for transporting Iranian oil.
- Expansion of secondary sanctions risk for any counterparties dealing with Iran: countries will receive a specific deadline for reducing ties, after which unilateral measures will follow.
- A promise of a significant sanctions resolution regarding an unnamed financial institution by the end of the week.
The most severe impacts have so far been postponed: Bessent referred to the announcement as a "warning shot," while President Trump has been personally calling world leaders with "specific requests." Experts assess that China, India, Turkey, Iraq, and the UAE are at risk. Tehran has responded with a promise of a "seismic" retaliation, and the Iranian finance minister has stated full readiness for new sanctions. 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 maritime blockades have already reduced its imports from Iran to about 340,000 barrels per day from 1.14 million in March.
Strait of Hormuz: Attack on Tanker and Negotiations through Oman
Early Tuesday morning, the UKMTO reported that an unidentified projectile struck an oil tanker approximately nine nautical miles off the coast of Oman: the machinery compartment was damaged, the crew was unharmed, and environmental impacts are being evaluated. The incident underscores that, despite US claims of "total control" over the Strait, shipping safety has not been restored.
The diplomatic track remains active. Iran and Oman continue to discuss a maritime protocol, while indirect contacts between Tehran and Washington are taking place through Pakistan. However, both sides maintain rigid positions: Iran insists on the lifting of the US maritime blockade and recognition of its right to regulate (and charge for) vessel transits, while Washington emphasizes freedom of navigation. A memorandum from June 17 already collapsed once in July, leading the market to assess the likelihood of a quick breakthrough with caution.
OPEC+: Quotas Restored, Physical Production — No
The September increase in quotas by 188,000 barrels per day concludes the reversal of the voluntary cuts from 2023, which totaled 1.65 million barrels per day. Seven countries from the alliance (Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, Oman; the UAE exited OPEC in May) have signaled that quotas will likely remain unchanged until the end of the year. The next decision regarding October is expected on September 6.
A key nuance for investors is that paper quotas and actual production have diverged. Due to the closure of the Strait, attacks on infrastructure, and forced outages, actual OPEC+ production remains several million barrels per day below February levels. This is why analysts warn that once 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 into UGS
The European gas market remains the most pressured segment of the energy sector. September futures at the TTF hub are trading near €65/MWh — the highest since January 2023 and over 20% higher than the level two weeks ago. Reasons include:
- Shortage of Qatari LNG: shipments from the Persian Gulf through the Strait of Hormuz are sporadic, and QatarEnergy is in no hurry to resume a full schedule.
- Low Inventories: EU underground gas storage was only 61.4% full as of August 17, compared to nearly 74% a year earlier; the target level for November 1 has been reduced from 90% to 80%.
- Heat and Hydropower: abnormal temperatures have increased demand for gas for generation, while record-low hydroelectric output has intensified the burden on gas-powered plants.
- Competition with Asia: spot LNG prices at JKM are around $21+/MMBtu; Japan, South Korea, and Taiwan are partially hedging risks with coal.
Against this backdrop, the American Henry Hub remains below $3/MMBtu with recordoutput in the US of around 122.5 billion cubic feet per day — the spread between American and global gas continues to justify a wave of investments in LNG export terminals.
Power Generation 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, hydropower generation in the EU fell to its lowest level in at least a decade, while France reduced nuclear power capacity due to overheating rivers, and intraday prices in France and Germany surged above €300/MWh, with Southeastern Europe exceeding €700/MWh. However, the grids have held up thanks to record solar generation: on peak hot days, solar plants produced 17% more than usual. The main takeaway for regulators is that the deficit occurs during evening hours, prompting accelerated investments in energy storage: the UK is subsidizing 7.6 GW of long-term battery systems, and Spain may triple storage capacity by the end of the year.
In the US, wind and solar for the first half of the year have surpassed coal and nuclear combined for the first time, accounting for 20% of generation; solar generation grew by 21%, hydropower by 9%, and wind by 6%. Demand from data centers continues to drive growth, although Texas has paused approvals for new sites.
Coal: Newcastle around $130 per tonne, Asia Hedging LNG Risks
Newcastle thermal coal has stabilized around $130/tonne after averaging $144 in June. Price pressures arise from cooling demand in China due to a rainy summer and increased domestic production in India (+7.5% YoY in July, reaching 69.75 million tonnes). Energy security supports demand: Japan, South Korea, and Taiwan are increasing coal purchases as a hedge against LNG supply disruptions. The consensus for Q3 is around $130/tonne with a gradual decline to $120 by 2027; coking coal remains near $240/tonne amid restrictions in China.
Russia: Record Oil Exports to Asia, Domestic Fuel Market in Manual Mode
Russian oil exports are pivoting eastward. In July, China bought 50% of Russian crude oil, while India purchased 37%; Indian refineries imported a record 2.8 million barrels per day — 55.5% of the country’s total imports. The average price of Urals in July was around $60 per barrel — above the new G7 and EU cap of $44.10 that has been in effect since February. Chinese purchases of Russian sea shipments increased by 28% over the month as refineries substitute for missing Middle Eastern barrels.
The domestic fuel market is facing a second wave of crisis:
- The ban on gasoline exports has been extended until January 31, 2027, while diesel fuel restrictions remain until September 1; no decision has yet been made regarding extensions for producers;
- Deputy Prime Minister Alexander Novak reported that several refineries have resumed operations after repairs and confirmed that the federal headquarters plans to meet twice a week;
- The deficit is being covered by imports (Indian gasoline has arrived in stores) and the production of environmental classes K-2–K-4, which will not exceed 10%;
- In the south, including the Krasnodar region, oil companies are imposing fuel release limits during the peak summer season;
- A ban on the export of aromatic hydrocarbons — raw materials for high-octane components — is under discussion.
What to Watch on August 26: Calendar for Energy Market Participants
- Details on US sanctions — the list of countries receiving deadlines and the announced resolution regarding the financial institution.
- Investigation into the attack on the tanker off the coast of Oman and the response from insurers and shipowners.
- Progress in Iran-Oman discussions regarding the shipping protocol in the Strait of Hormuz.
- Weekly API data on oil and petroleum products inventories in the US.
- Injection dynamics in European UGS and TTF prices against the backdrop of the remaining injection season.
- Preparation for the OPEC+ meeting on September 6: signals of a pause in quota increases.
In summary: the oil market is balancing between two scenarios — a successful financial pressure campaign leading to the reopening of the Strait and a decline in Brent to $80–85, and escalation that could drive prices back to triple-digit levels seen in spring. The European gas market, in any case, is entering the heating season with lower reserves than a year ago, while the energy transition receives an additional impetus from record solar generation and investments in storage. Read daily analytics on the energy market in the Open Oil Market Telegram channel.
