Oil Market: Diplomacy in Hormuz Drives Prices Down
The oil market has experienced one of the sharpest corrections of the year. Following July's rally, when Brent crude surpassed $90 per barrel due to the blockade of the Hormuz Strait, news of an imminent temporary agreement between Iran, Oman, and the United States flipped the trend. The parties are discussing a 60-day plan for the division of shipping routes: tankers heading to the Persian Gulf will follow Iranian routes, while vessels leaving the Gulf will take routes near Oman without any toll charges. Against this backdrop:
- Brent traded in the range of $78.5–79.7 per barrel by the morning of August 6, after declining over 5% in the previous session;
- WTI fell to $74.8–75.2 per barrel;
- prices are consolidating in a narrow corridor of $78.6–81.3 following a sharp decline on August 3–4;
- analysts' average forecast for Brent price for the entire year of 2026 remains above $85 per barrel, with the market factoring in geopolitical risk premiums.
The U.S. President publicly stated that there has been "significant progress" in negotiations and expressed readiness to lift some sanctions against Iranian oil exports and to move military vessels away from Iranian waters in the event a deal is reached. Meanwhile, Tehran officially insists that it is discussing shipping arrangements only with Oman, not directly with Washington, leaving room for further plot twists. The key question for the oil and product markets is whether the de-escalation will hold or if tensions in the Persian Gulf will resume in September.
OPEC+: Ending the Production Increase Cycle
The OPEC+ alliance confirmed that, starting in September, seven member countries, including Russia and Saudi Arabia, will raise their production quotas by an additional 188,000 barrels per day. This decision marks the end of a gradual return to the market of 1.65 million bpd of voluntary cuts initiated earlier this year. Key details include:
- the total allowable production level of the alliance will reach 36.206 million bpd;
- Saudi Arabia and Russia will receive equal increases of 62,000 bpd, bringing their totals to 10.478 million and 9.949 million bpd, respectively;
- no further increases in quotas are planned until the end of 2026, according to sources in the organization;
- actual production in several countries lags behind quotas due to disruptions in export infrastructure—attacks on facilities in Russia and tensions in the Persian Gulf hinder the full recovery of supply.
The next OPEC+ ministerial meeting is scheduled for early September— the market will closely monitor the alliance's rhetoric regarding 2027, especially in light of the potential normalization of the situation surrounding the Hormuz Strait.
European Gas Market: Record Low Stocks Ahead of Winter
In contrast to oil, the situation in the European gas market remains tense. According to Gas Infrastructure Europe, as of early August, underground gas storage (UGS) in the EU is only 57% full, which is below the previous record low in 2021 and significantly below the European Commission's norm of 90% by the start of the heating season. The main factors contributing to this deficit include:
- reduced LNG supplies via the Hormuz Strait—estimates suggest that up to 20% of global LNG volumes have temporarily fallen out of logistics;
- a 7% year-over-year decline in LNG imports to Europe in August;
- spot prices at the TTF hub have settled at $696 per thousand cubic meters compared to an average of $626 in July—an increase of nearly 50% compared to August of last year;
- the contribution of wind generation to Europe's energy balance fell to 10% in early August from 14% a year earlier, further increasing the load on gas generation.
Analysts warn that if the current injection dynamics persist, Europe risks entering the heating season with storage levels no higher than 75%. For industrial gas consumers and energy companies, this means heightened price volatility and the risk of spikes in electricity costs during the winter of 2026–2027.
Sanctions and Geopolitics: Between Hormuz and Ukraine
The sanctions backdrop remains a determining factor for the oil and gas sector. Washington links potential easing of restrictions against Iranian oil exports directly to progress regarding the Hormuz Strait, while the sanctions regime against Russian energy resources remains unchanged. Concurrently, attacks on refining and export infrastructure continue to impact actual supply volumes of oil and petroleum products from Russia and Persian Gulf countries, which analysts at Kpler cite as one of the reasons for shifting the forecast for recovery in Middle Eastern production from September 2026 to early 2027. For global traders and energy market players, the scenario remains bipolar: a sustained de-escalation could bring oil back to the range of $70–75, while a breakdown in talks or a new attack on infrastructure could once again push Brent to $90 and beyond.
Russian Fuel Market: Export Restrictions Persist
Within Russia, authorities continue to manage fuel shortages through a set of administrative measures. Key decisions from recent weeks include:
- a complete ban on the export of gasoline, diesel fuel, marine fuel, and gas oil for all producers has been extended until the end of September, effectively until the end of 2026 for gasoline;
- partial easing of restrictions for diesel and gas oil from direct producers is set to start on September 1;
- retail prices for automotive gasoline have risen nearly 14% since the beginning of the year, and diesel prices have increased by almost 15%, significantly outpacing overall inflation;
- import of petroleum products has been launched to stabilize the domestic balance, while special pricing rules for state fuel procurement have been suspended until the end of the year.
Experts note that the Russian export ban primarily impacts external markets—particularly Europe and the United States, where diesel shortages have already affected exchange prices, whereas Asia, with its own refining capacity, feels the impact less severely.
Asian Demand: China and India Increase Purchases
Largest Asian importers continue to dictate the balance of the global oil and gas market. China maintains its status as the leading buyer of Russian and Middle Eastern oil, while simultaneously increasing its own production and investments in exploration. India continues to benefit from favorable terms for purchasing Urals crude, while also developing deepwater exploration programs to reduce long-term import dependence. Both countries remain key drivers of demand amid cooling consumption in developed economies.
Energy Transition: Renewables Set to Surpass Coal
According to the International Energy Agency (IEA), by 2026, renewable energy sources (RES) are expected to surpass coal for the first time in the global electricity generation structure. Solar generation is anticipated to add approximately 600 TWh of capacity per year, becoming the second most significant source of "green" electricity after hydropower. Furthermore:
- the gas crisis driven by disruptions in the Hormuz Strait has accelerated the transition to solar generation in several countries as a means of reducing dependence on imported fuel;
- worldwide growth in new solar capacity in 2026 may slow for the first time in 25 years due to market saturation and regulatory policy changes;
- CO2 emissions from the energy sector are forecasted to rise by 1% in 2026 due to a temporary increase in coal generation amid high gas prices, but are expected to stabilize by 2027.
Coal: A Temporary Comeback Amid High Gas Prices
Rising natural gas prices have rekindled interest among energy companies in coal generation as a backup source of electricity. In the Asia-Pacific region, where the primary demand for energy coal is concentrated, consumption remains close to record levels. Despite a long-term decarbonization strategy, in the short term, coal continues to serve as a safeguard for energy systems against gas supply disruptions, especially during peak demand periods.
Day's Recap: What to Expect for Energy Sector Investors
The fuel and energy complex enters the weekend with a mixed set of signals. The oil market shows signs of de-escalation amid Hormuz diplomacy, but geopolitical risks remain high and could return at any moment. Conversely, the European gas market is entering a phase of structural tension ahead of winter, which creates the potential for increased electricity price volatility. The Russian fuel market maintains administrative control, while the global energy transition continues to gain momentum, despite a temporary renaissance of coal generation. For participants in the energy market—including oil and gas companies, refineries, renewable energy investors, and petroleum traders—the key indicators for the coming weeks will be the outcome of negotiations regarding the Hormuz Strait, gas injection rates in European storage facilities, and OPEC+'s decisions at the alliance's September meeting.
