Oil Market: Brent between $84 and $87 Amid Tanker Strikes
Oil prices are exhibiting heightened volatility. After a nearly 5% drop at the beginning of the week to $84 per barrel for Brent, the market rebounded on Wednesday: September futures for Brent rose above $87, while WTI traded around $82. Several events contributed to this upward momentum:
- Attacks on Tankers in the Strait of Hormuz: The Islamic Revolutionary Guard Corps (IRGC) of Iran reported successfully targeting three oil tankers on an "unauthorized" route. Transit between the Persian Gulf and Oman Gulf remains severely restricted, with parts of the route mined.
- Strikes on Military Installations: Iran conducted missile strikes on U.S. bases in the region, while the U.S. and Saudi Arabia carried out joint operations in Iraq. Iraqi oil exports are declining due to shipment disruptions.
- Logistics Overhaul: Saudi Arabia is redirecting some shipments to bypass hotspots — exports through the Suez Canal have significantly increased, while the Houthis are threatening shipping in the Bab-el-Mandeb Strait.
Several analysts do not rule out Brent moving towards $100 per barrel in the event of further escalation. Counterbalancing factors include a slowdown in global oil demand, a strong dollar, and sell-offs in Asian stock markets.
OPEC+: The 'Seven' Completes Recovery of Production
The OPEC+ alliance, now without the UAE which exited the organization in May, continues its strategy of gradual supply increase. For August, the quotas for the 'Seven' (Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman) have been raised by 188,000 barrels per day, with a total target level reaching 36 million barrels per day. The final step is expected to be approved at the upcoming meeting on August 2 — an additional increase of 188,000 b/d for September, fully winding down the voluntary restrictions package 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 notably lags behind allowed levels due to conflicts in the Middle East, which mitigates the effects of quota increases on market balance.
Gas Market: TTF at March Highs, EU Gas Storage Only 55% Full
The European gas market is entering a high-risk zone ahead of the heating season. TTF hub prices reached €64/MWh (about $750 per thousand cubic meters) at the end of July, the highest since mid-March. Key challenges facing the EU include:
- Record Low Storage Levels: EU gas storage facilities are approximately 55.3% full — the lowest for this date since 2021 (a year ago — 76.2%, in 2024 — 83.7%).
- Slowing Injection Rates: Daily rates of storage replenishment are 20% lower than last year’s; 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 — Asia is purchasing available volumes amidst the Middle Eastern crisis and risks to supplies from the Persian Gulf.
- Heat and Power Demand: Extreme temperatures in Europe are increasing gas-fired power generation to supply air conditioning systems.
Forecasts indicate that by the beginning of winter, storage levels may fail to reach even 75%, laying the groundwork for high price volatility in the fourth quarter. Meanwhile, a new daily record for pipeline deliveries of Russian gas to China has been set in the eastern direction.
