Oil Market: Geopolitical Premium Rapidly Deflates
Oil prices are undergoing a phase of rapid risk reassessment. Following reports that Washington has refrained from launching new strikes on Iranian targets and parties have agreed to suspend retaliatory exchanges, the market began aggressively pricing in a scenario of normalization of shipping in the Persian Gulf. October futures for Brent, which were recently trading at around $90 per barrel, plummeted more than $6 on Monday and stabilized around $85 on Tuesday morning. U.S. WTI is holding steady at approximately $81 per barrel.
Key factors influencing the oil market dynamics this week:
- De-escalation in the Middle East: The prospect of reopening the Strait of Hormuz means a significant return of Middle Eastern oil to the market and the removal of the risk premium that has kept prices above $90 for months.
- Surplus Forecasts: Analysts anticipate a notable surplus in supply by 2026 — U.S. production remains at record levels, Brazil achieved a historical production peak in June, and the easing of sanctions on Iran is adding additional barrels to the market.
- Weak Demand: The recovery of consumption in Asia is lagging behind expectations, while high prices in the first half of the year have spurred energy-saving measures and a shift to alternative sources.
For traders and oil companies, this signals high volatility: any disruption in the negotiation process could drive prices back to $90, whereas a confirmed reopening of the Strait would pave the way for further correction.
OPEC+ Concludes Production Increase Cycle
The OPEC+ alliance, operating after the UAE's exit from the format as of May 1, 2026, has agreed on the final quota increase. The main parameters of the decision are:
- From September, total production will increase by an additional 188,000 barrels per day — the same increment as in June, July, and August.
- This move concludes the process of lifting voluntary restrictions amounting to 1.65 million barrels per day, implemented in 2023; from February to August, quotas have already increased by approximately 940,000 b/d.
- After September, the alliance will take a pause: complex negotiations will begin regarding baseline production levels for 2027, assessing the actual production capacities of each participant.
Simultaneously, OPEC+ warned of threats to energy supply due to attacks on infrastructure and confirmed its readiness to slow down or suspend increases if the market balance deteriorates. The coincidence of the final quota increase and the potential 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 the Major U.S.-Iran Deal
The U.S. President has stated that Washington and Tehran are discussing the complete restoration of shipping through the Strait of Hormuz in the coming days, referring to this as the first phase of negotiations, which will subsequently cover Iran's nuclear program. Iran, for its part, officially denies direct contact with the U.S. side and emphasizes that consultations are only taking place with Oman regarding temporary safe routes and management mechanisms for the Strait. The contentious issue of tolls for vessels remains: Tehran insists on its control over the artery, while the U.S. claims it will not permit tolling.
Under normal conditions, about one-fifth of the world's oil supply and a significant share of Qatari LNG passes through the Strait of Hormuz, thus the outcome of the negotiations will determine the trajectory of both oil and gas prices through the end of the year. The market is pricing in an optimistic scenario, but the recent history — with the ceasefire violation in July — serves as a reminder of the fragility of any agreements.
Europe's Gas Market: Low Stocks and Expensive Gas
The European gas market is in noticeably 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. The fill rate of European underground gas storage facilities by early August is only around 57%, down from over 85% a year earlier, and market participants are increasingly talking about the risk of not reaching target stock levels by the start of the heating season.
Reasons for tension in the EU gas market include:
- Shortage of Middle Eastern LNG supplies due to the blockade of the Strait of Hormuz;
- Fierce price competition with Asian buyers for available LNG cargoes;
- Gradual phasing out of EU reliance on Russian gas: restrictions on spot LNG have been in effect since April 2026, and bans on short-term pipeline contracts are in place from mid-June.
LNG: Imports to Europe Hit Two-Year Low
In July, LNG deliveries from terminals to Europe's gas transportation system totaled around 8.4 billion cubic meters — a 17% drop from June and 26% lower compared to July of last year. This is the lowest monthly volume in nearly two years. From January to July, approximately 81.1 billion cubic meters were delivered to the grid, representing a 2.5% decline from the 2025 levels. Terminals are operating below capacity, and some contracted volumes are being redirected to premium Asian markets. The potential reopening of the Strait of Hormuz and the return of Qatari volumes could shift the situation, but effects are unlikely to be seen until autumn — during the peak gas injection campaign.
Electricity and Renewable Energy: Renewable Generation Outpaces Coal
Against the backdrop of gas shortages, the global energy transition is accelerating. According to the International Energy Agency, in 2026, renewable energy sources are expected to surpass coal for the first time in global electricity generation. Electricity generation from renewables will grow by more than 8%, and their share in the global energy balance is expected to rise from 33% to 37% by 2027. Solar energy remains a driving force: an additional 600 TWh of production is anticipated annually, placing solar second among renewables after hydroelectric power. The LNG supply crisis and high gas prices further enhance the investment appeal of solar power plants and energy storage systems, reducing importing countries' dependence on volatile fuel markets.
Coal: Temporary Support Amid Expensive Gas
The coal sector is reaching a symbolic threshold — yielding the top position to renewables in global generation, yet remaining critically important for energy security in Asia. High gas and LNG prices sustain demand for thermal coal in China, India, and Southeast Asia, where coal-fired power plants meet peak summer loads. For exporters such as Indonesia, Australia, Russia, and South Africa, this translates into stable sales; however, the medium-term trend is clear: the share of coal in the global energy balance will decrease as new renewable and storage capacities are introduced.
Russian Fuel Market: Gasoline Export Ban Extended until 2027
The domestic oil products market in Russia remains in acute imbalance. The government has extended the complete ban on gasoline exports until January 31, 2027 — this measure applies to both producers and traders. The situation in the regions remains challenging:
- Queues at gas stations, limits on fuel dispensing, and local shortages of AI-95 are reported in several regions;
- Retail prices in certain regions have exceeded 100 rubles per liter;
- Oil refining has dropped to minimal levels in several years due to unscheduled shutdowns of refineries damaged by drone attacks;
- The shortage is partially compensated by supplies from Belarus, as well as purchases from India and Kazakhstan;
- Discussions are underway about extending export restrictions to diesel fuel, and the Federal Antimonopoly Service has intensified checks on oil traders.
Experts do not anticipate a quick decrease in prices: extending the embargo is more likely to reduce the volatility of wholesale quotes, and noticeable improvement in balance might not happen until at least the fourth quarter — contingent on the recovery of refining capacities.
What This Means for Investors: Key Reference Points for the Week
Wednesday, August 5, 2026, is poised to be one of the defining days for the commodity and energy sector. Key focuses for investors and market participants include:
- The progress of negotiations between the U.S. and Iran and official statements on the status of the Strait of Hormuz — the main driver for Brent and WTI oil;
- Responses from the gas market: TTF price dynamics and the rate of gas injection into European storage;
- Signals from OPEC+ regarding terms of deals for 2027 following the final September quota increase;
- Developments in the fuel crisis in Russia and potential new regulatory measures;
- Corporate reports from major oil and gas companies confirming the sector’s resilience to price volatility.
The base scenario assumes that if de-escalation is confirmed, Brent may continue drifting towards $80 per barrel amid increasing supply, while Europe’s gas market will remain expensive at least until the return of Middle Eastern LNG volumes. For long-term investors, the key structural trend remains the acceleration of the energy transition: 2026 will be remembered as the year when renewable energy first surpassed coal in global electricity generation.
