Oil Market: Brent near $92, WTI around $85 — a pause after the rally
Oil prices ended Monday with a decline of more than 2%: Brent closed near $92 per barrel, and WTI is trading around $85. This marks the first significant correction after two weeks of rising prices, during which the market priced in stalled negotiations related to the Strait of Hormuz and attacks on vessels in the Persian and Oman Gulfs. Compared to the pre-war level (around $71 for Brent at the end of February), the geopolitical risk premium still stands at about 30%.
Key factors influencing price dynamics today include:
- Sanction factor: The market is awaiting specifics on new U.S. restrictions — tightening pressure on buyers of Iranian oil could reduce supply, but it simultaneously raises the risk of escalation in the Strait.
- Physical flows: Transit through the Strait of Hormuz remains significantly below pre-war levels of approximately 110 vessels per day; tracking data indicates daily passages ranging from one to several dozen, while hundreds of tankers wait off the coast.
- EIA forecast: The U.S. Energy Information Administration expects an average Brent price of around $85 in the third quarter and approximately $87 for the full year 2026; any return of Middle Eastern production to pre-war levels is not anticipated until at least early 2027, while losses of about 0.6 million barrels per day are forecast to continue through the end of next year.
- Inventories: An API report is due on Tuesday evening, followed by EIA data on Wednesday; U.S. commercial oil inventories remain below the five-year average, supporting a temporary market structure.
“Economic Pariah”: U.S. shifts its conflict with Iran to the financial arena
On August 24, U.S. Treasury Secretary Scott Bessent announced an initiative dubbed “economic D-Day” by the administration. Its goal is to “cut off all economic lifelines” of the Iranian regime and achieve a resumption of shipping through the Strait of Hormuz without a new round of airstrikes. Key elements of the package include:
- Sector-specific sanctions targeting five areas deemed “vital” for Tehran: digital assets, technology, gold, aviation, and maritime transport.
- Over 60 legal entities, individuals, and vessels are added to OFAC lists — including a network of brokers and a "shadow fleet" operating through the UAE, Hong Kong, China, Singapore, and Switzerland to transport Iranian oil.
- Expansion of secondary sanctions risk for any counterparties of Iran: countries will receive specific deadlines to curtail their links, after which unilateral measures will follow.
- A major sanction announcement regarding an unnamed financial institution is promised by the end of the week.
The toughest measures are currently on hold: Bessent referred to the announcement as a “warning shot,” while President Trump personally calls global leaders with “specific requests.” At risk, according to experts, are China, India, Turkey, Iraq, and the UAE. Tehran has responded with a promise of a “seismic” counter-response, and the Iranian finance ministry stated its full readiness for new restrictions. A critical question for the oil market is whether Washington will impose sanctions on Chinese banks: China remains the main buyer of Iranian oil, although maritime blockade has already reduced its imports from Iran to about 340,000 barrels per day, down from 1.14 million in March.
Strait of Hormuz: tanker attack and negotiations via 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 engine room was damaged, but the crew was unharmed. The environmental impact is being assessed. This incident underscores that despite U.S. claims of “full control” over the Strait, the safety of shipping has not been restored.
Diplomatic talks continue. Iran and Oman are discussing a protocol for maritime management, and indirect contacts between Tehran and Washington are ongoing through Pakistan. However, the positions of the parties are rigid: Iran insists on the lifting of the U.S. maritime blockade and recognition of its right to regulate (and charge for) vessel passages, while Washington demands freedom of navigation. A memorandum from June 17 has already collapsed once in July, so the market views the likelihood of a swift breakthrough with caution.
OPEC+: quotas reinstated, physical production not
The September increase in quotas by 188,000 barrels per day completed the reversal of voluntary cuts in 2023, totaling 1.65 million barrels per day. Seven member states of the alliance (Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, Oman; the UAE left OPEC in May) have indicated that quotas are likely to remain unchanged until the end of the year. A decision regarding October is expected on September 6.
A key nuance for investors: the paper quotas and actual production have diverged. Due to the closure of the Strait, strikes on infrastructure, and forced shutdowns, 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 delayed storage injections
The European gas market remains the most strained 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 levels two weeks ago. Reasons include:
- Qatari LNG shortage: shipments from the Persian Gulf through the Strait of Hormuz occur sporadically, and QatarEnergy is not rushing to return to a full schedule.
- Low inventories: EU gas storage was only 61.4% full as of August 17, down from nearly 74% a year earlier; the target level for November 1 had to be reduced from 90% to 80%.
- Heat and hydropower: abnormal temperatures increased gas demand for generation, while record-low hydroelectric output added strain on gas units.
- Competition with Asia: spot LNG prices in JKM are holding around $21+/MMBtu; Japan, Korea, and Taiwan are partially hedging risks with coal.
Against this backdrop, the American Henry Hub remains below $3/MMBtu with record production in the U.S. at around 122.5 billion cubic feet per day — the spread between American and global gas continues to justify a wave of investments in export LNG terminals.
Electricity and renewables: record solar generation saves grids
The summer of 2026 has tested Europe’s power systems. In June and July, hydropower output in the EU fell to its lowest level in at least a decade, France scaled back nuclear capacity due to overheating rivers, and intraday prices in France and Germany exceeded €300/MWh in evening hours, while in Southeast Europe, prices reached €700/MWh. Meanwhile, the grids managed to withstand pressure thanks to record solar generation: during peak heat days, output from solar plants was 17% above normal. The main conclusion from regulators is that the shortage occurs in the evening hours, which accelerates investments in storage: the UK is subsidizing 7.6 GW of long-term battery projects, and Spain may triple its storage capacity by the end of the year.
In the U.S., wind and solar in the first half of the year for the first time surpassed coal and nuclear combined, accounting for 20% of output; solar generation increased by 21%, hydropower by 9%, and wind by 6%. Demand from data centers remains a growth driver, although Texas has paused the approval of new sites.
Coal: Newcastle around $130 per ton, Asia hedges against LNG risks
Newcastle thermal coal has stabilized around $130/ton after averaging $144 in June. Price pressure is coming from cooling demand in China due to a rainy summer and rising domestic production in India (+7.5% y/y in July, to 69.75 million tons). Energy security support comes from Japan, South Korea, and Taiwan, which are increasing coal purchases as insurance against LNG supply disruptions. Consensus for Q3 is around $130/ton, gradually decreasing to $120 by 2027; coking coal remains near $240/ton amid restrictions in China.
Russia: oil exports to Asia at record highs, domestic fuel market in manual mode
Russian oil exports are being redirected to the East. In July, China purchased 50% of Russia’s crude oil, while India accounted for 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 about $60 per barrel — above the new G7 and EU cap of $44.10, which has been in effect since February. Chinese purchases of Russian maritime shipments increased by 28% month-over-month, as refineries replaced falling Middle Eastern barrels.
The domestic market for petroleum products is facing its second wave of crisis:
- The ban on gasoline exports has been extended until January 31, 2027, while restrictions on diesel fuel are in place until September 1, with a decision on extensions for producers still pending;
- Deputy Prime Minister Alexander Novak announced the return of several refineries to operation after repairs and confirmed that the federal headquarters intends to meet twice a week;
- The deficit is being covered by imports (Indian gasoline has entered the market) and production of fuel classes K-2 to K-4, which will not exceed 10%;
- In the south, including the Krasnodar region, oil companies are imposing fuel dispensing limits during the peak holiday season;
- A potential ban on the export of aromatic hydrocarbons — the raw material for high-octane components — is being discussed.
What to watch on August 26: calendar for energy market participants
- Details of U.S. sanctions — a list of countries receiving “deadlines” and the announced decision regarding the financial institution.
- Investigation into the tanker attack off the coast of Oman and reactions from insurers and shipowners.
- Progress in negotiations between Iran and Oman regarding the maritime protocol in the Strait of Hormuz.
- Weekly API data on oil and petroleum product inventories in the U.S.
- Injection dynamics in European gas storage facilities and TTF quotes amid the remaining injection season.
- Preparations for the OPEC+ meeting on September 6: signals of a pause in quota increases.
In conclusion, the oil market is balancing between two scenarios — successful financial pressure leading to the reopening of the Strait and a drop in Brent to $80–85, and escalation that would push prices back to three-digit figures seen in spring. The European gas market, in any case, enters the heating season with a lower buffer than a year ago, while the energy transition receives an additional impetus from record solar generation and investments in storage. For daily analytics on the energy market, follow the Telegram channel Open Oil Market.
