Oil Market: Geopolitical Premium Rapidly Deflating
Oil prices are undergoing a phase of rapid risk reassessment. Following reports that Washington has opted for no new attacks on Iranian targets and that parties have agreed to pause their exchange of strikes, the market has begun aggressively pricing in a scenario of normalization of shipping in the Persian Gulf. October futures for Brent, which were trading near $90 per barrel not long ago, plummeted by over $6 on Monday, stabilizing around $85 on Tuesday morning. American WTI is holding steady near $81 per barrel.
Key factors influencing the oil market this week include:
- De-escalation in the Middle East: The prospect of reopening the Strait of Hormuz implies a return to the market of significant volumes of Middle Eastern oil and the removal of the risk premium that has kept prices above $90 for months.
- Surplus forecasts: Analysts expect a noticeable oversupply in 2026 — U.S. production remains at record levels, Brazil set a new historical production high in June, and the easing of sanctions on Iran adds additional barrels to the market.
- Weak demand: The recovery in Asian consumption is slower than anticipated, and high prices in the first half of the year have encouraged energy-saving practices and a shift to alternative sources.
For traders and oil companies, this indicates high volatility: any disruption in the negotiation process could push prices back to $90, while confirmed reopening of the Strait may pave the way for further correction.
OPEC+ Ends Production Increase Cycle
The OPEC+ alliance, transitioning to a “seven-member” format (Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman) following the UAE's exit effective May 1, 2026, has agreed on a final quota increase. Key parameters of the decision include:
- From September onwards, total production will increase by an additional 188,000 barrels per day — the same increment as in June, July, and August.
- This step concludes the process of lifting voluntary restrictions of 1.65 million barrels per day that were implemented in 2023; from February to August, quotas have already risen by approximately 940,000 b/d.
- After September, the alliance will take a pause, as complex negotiations regarding base production levels for 2027, assessing the actual production capacities of each member, loom ahead.
Concurrently, OPEC+ has warned of threats to energy supply due to infrastructure attacks and confirmed readiness to slow or halt increases if market balance deteriorates. The timing of the final quota increase alongside a possible reopening of the Strait of Hormuz heightens bearish risks for oil prices in the second half of the year.
Strait of Hormuz: First Phase of Major US-Iran Deal
The U.S. President announced that Washington and Tehran are discussing the full restoration of shipping through the Strait of Hormuz in the coming days, referring to this as the first phase of negotiations that will follow discussions about Iran’s nuclear program. Iran, for its part, formally denies direct contact with the American side and emphasizes that consultations are only being held with Oman regarding a temporary safe route and mechanisms for managing the Strait. The issue of tolls for vessel passage remains contentious: Tehran insists on its control over the artery, whereas the U.S. asserts that it will not allow toll collection.
Under normal conditions, approximately one-fifth of global oil supplies and a significant share of Qatari LNG pass through the Strait of Hormuz, making the outcome of negotiations crucial for determining oil and gas price trajectories by year-end. The market is pricing in an optimistic scenario; however, the events of recent months, including the collapse of the ceasefire in July, underscore the fragility of any agreements.
European Gas Market: Low Stocks and Expensive Gas
The European gas market is in significantly worse shape than a year ago. September futures at the TTF hub are trading around $696 per thousand cubic meters, nearly 1.5 times higher than last year's levels. As of early August, European underground gas storage was only about 57% full, compared to over 85% a year earlier, and market participants are increasingly voicing concerns over the risk of failing to meet target stock levels by the heating season's start.
Reasons for the tension in the EU gas market include:
- Shortage of Middle Eastern LNG supplies due to the blockage of the Strait of Hormuz;
- A sharp price competition with Asian buyers for available liquefied gas shipments;
- The phased rejection of EU dependence on Russian gas: restrictions on spot LNG have been in place since April 2026, and bans on short-term pipeline contracts took effect mid-June.
LNG: Imports to Europe Drop to Two-Year Low
In July, LNG deliveries from terminals into the European gas transport network amounted to approximately 8.4 billion cubic meters — a 17% decrease from June and 26% lower than in July of the previous year. This marks the lowest monthly volume in nearly two years. From January to July, around 81.1 billion cubic meters were delivered, which is 2.5% less than in 2025. Terminals are operating at less than full capacity, with some contracted volumes being redirected to premium Asian markets. The potential reopening of the Strait of Hormuz and the return of Qatari volumes could reverse this situation, but the effect is unlikely to manifest before the autumn — at the peak of gas injection into storage facilities.
Electricity and Renewables: Renewable Generation Outpacing Coal
Amid the gas shortage, the global energy transition is accelerating. According to the International Energy Agency, 2026 will see renewable energy sources surpass coal for the first time in global electricity generation. Production from renewable sources is projected to grow by over 8%, and their share in the global energy balance is expected to rise from 33% to 37% by 2027. Solar energy remains a key driver: approximately 600 TWh of additional generation is anticipated for the year, placing solar in second place among renewables after hydropower. The LNG supply crisis and high gas prices are further increasing the investment appeal of solar power plants and energy storage systems, thereby reducing importing countries’ dependence on volatile fuel markets.
Coal: Temporary Support Amid High Gas Prices
The coal sector is crossing a symbolic threshold — yielding its primacy to renewables in global generation but remaining critically important for energy security in Asia. High prices for gas and LNG sustain demand for thermal coal in China, India, and Southeast Asia, where coal-fired power plants cover peak summer loads. For exporters — Indonesia, Australia, Russia, and South Africa — this translates to stable sales, but the medium-term trend is evident: the share of coal in the global energy balance will decline as new renewable and storage capacity comes online.
Russian Fuel Market: Ban on Gasoline Exports Extended to 2027
Russia's domestic oil products market remains in a state of acute imbalance. The government has extended the full ban on gasoline exports until January 31, 2027 — this measure applies to both producers and traders. The situation in the regions remains complex:
- In several regions, queues at gas stations, fuel release limits, and a local deficit of AI-95 are being reported;
- Retail prices in certain areas have exceeded 100 rubles per liter;
- Oil refining has dropped to minimal levels in several years due to unscheduled stops at refineries damaged by drone attacks;
- Deficits are being partially compensated by supplies from Belarus and purchases from India and Kazakhstan;
- There are discussions about extending export restrictions to diesel fuel, with the Federal Anti-Monopoly Service intensifying checks on oil traders.
Experts do not foresee a rapid decline in prices: the extension of the embargo is likely to reduce the volatility of wholesale quotes, while a notable improvement in balance is not expected until at least the fourth quarter — contingent on the restoration of refining capacity.
What This Means for Investors: Key Indicators for the Week
Wednesday, August 5, 2026, promises to be a defining day for the commodities and energy sector. In the spotlight for investors and market participants in the energy sector are:
- The progress of U.S.-Iran negotiations and official statements regarding the status of the Strait of Hormuz — a key driver for Brent and WTI;
- Reactions in the gas market: the dynamics of TTF quotes and the speed of gas injection into European storage;
- Signals from OPEC+ regarding parameters for the 2027 deal following the final September quota increase;
- The development of the fuel crisis in Russia and potential new regulatory measures;
- Corporate reports from oil and gas majors affirming the sector's resilience to price volatility.
The base scenario anticipates that with confirmation of de-escalation, Brent will continue to drift toward $80 per barrel amid growing supply, while the European gas market is expected to remain expensive at least until Middle Eastern LNG volumes return. For long-term investors, a key structural trend remains the acceleration of the energy transition: 2026 will be remembered as the year when renewable energy officially surpassed coal in global electricity production.
