Oil Market: Brent at $88–89 Amid Shortages and Record Inventory Growth in the US
On Thursday morning, Brent is trading around $88 per barrel, while WTI is approximately $83, with prices down more than $1 following the downward revision of global demand forecasts. The previous day, the international benchmark closed at $88.98, briefly rising to $89.5 — about 24% higher than the levels preceding the launch of the US-Israeli military campaign against Iran at the end of February. The oil market is being pulled in different directions by various factors:
- Supply Shortage: According to the latest monthly report from the IEA, the global oil market is facing a shortfall of about 1.8 million barrels per day in the third quarter due to the conflict in the Middle East and limited shipping through the Strait of Hormuz.
- Record Inventory Growth in the US: EIA data showed a rise in commercial crude oil stocks by 17.4 million barrels in just one week — the highest weekly increase since the beginning of 2023, which cooled off the "bulls."
- Brent-WTI Spread Has Widened: Middle Eastern disruptions are affecting Brent-linked barrels more significantly, while US production remains shielded from regional logistical risks.
- Speculative Positioning: Fund managers have reduced their net long positions in Brent and WTI for the second consecutive week, taking profits amid uncertainties in negotiations.
Hormuz Crisis: US-Iran Talks Stalled, Attacks on Shipping Continue
Geopolitics remains the main price driver for oil and gas. Negotiations to unblock the Strait of Hormuz have stalled, with Washington claiming "complete control" over the waters and intensifying pressure on Tehran by expanding sanctions and maritime blockades on Iranian ports. Meanwhile, the escalation has spread to the Red Sea: a Houthi attack on a bulk carrier in the Bab-el-Mandeb Strait resulted in the deaths of six sailors — the first victims among crews in over a year, while US forces carried out a missile strike on a container ship in the Gulf of Oman. However, dialogue channels are not closed: negotiations between Iran and Oman regarding a phased reopening of the strait are reportedly at an advanced stage, and it is these expectations that keep Brent below $90, rather than above $100. Any significant progress could quickly ease some military premiums; conversely, a breakdown in contacts threatens a new surge in oil and LNG prices.
OPEC+: Final Quota Increase and Pause Until Year-End
The OPEC+ alliance approved the last quota increase in the current series of 188,000 barrels per day from September at its August meeting, completing the return of 1.65 million b/d of voluntary cuts from 2023 to the market. The decision is largely symbolic: actual production and exports from Persian Gulf countries are significantly lagging behind quotas due to military risks, damaged infrastructure, and logistical constraints. Analysts' base scenario anticipates a pause in quota changes in the fourth quarter and a transition to complex negotiations regarding production bases for 2027, which promise to be tense amid the UAE's exit from the organization in May. The next meeting for key participants is scheduled for September 6.
Gas Market: Europe With Record-Low Storage Levels Ahead of Winter
The European gas market is the second major focus of the day. Prices at the TTF hub have remained in the €58–62 per MWh range following a more than 10% spike earlier in the week — approximately twice the levels at the beginning of the year. The reasons for the tension are:
- EU gas storage is holding around 55–57% capacity — about 22 percentage points below the five-year average and at the lowest seasonal level on record since observations began in 2009.
- LNG supplies from Qatar through the Strait of Hormuz are intermittent, and competition with Asia for available liquefied natural gas cargoes is intensifying.
- An accident at the Norwegian Ormen Lange field, with repairs extending until February 2027, is removing over 1 billion cubic meters from the market during the heating season.
- The heat in Europe is maintaining electricity demand for air conditioning, increasing gas consumption for generation.
Brussels has already lowered the mandatory storage filling target from 90% to 80% by November 1, although this too is in question given the current injection rates. Commerzbank has raised its gas price forecast for the end of the year to €50/MWh, while Uniper expects a range of €50–60, as long as the strait remains closed. For Europe's industry and energy sector, this means an expensive winter and the continued presence of a risk premium in prices throughout the 2026–2027 horizon.
Sanction Pressure on Russia: New Package in the US Congress
The US House of Representatives is considering a bipartisan sanctions package targeting Russia's energy revenues, banking sector, and networks circumventing restrictions, with threats of increased tariffs for the largest buyers of Russian energy resources. For the global oil market, this adds another layer of uncertainty: tightening secondary sanctions could reshape the flows of Russian oil and oil products to Asia and expand Urals discounts, as India and China continue to balance lucrative purchases with the risk of trade restrictions from Washington.
Russian Oil Products Market: Fuel Embargo Extended With Priority on Domestic Market
The domestic fuel market in Russia remains under manual control following drone attacks on refineries and a summer spike in demand. The government has extended the complete ban on the export of automotive gasoline until January 31, 2027; restrictions on the export of diesel fuel, marine fuel, and gas oils are in effect until the end of August, while from September 1, direct producers of diesel will be allowed to resume exports. Additionally, a special fuel provision system for agricultural producers is in place during the height of the harvest campaign. Authorities estimate that the market has begun to stabilize partially, although the gasoline situation remains tense in certain regions. For the global oil products market, the extension of the Russian embargo means a reduction in diesel exports and support for crack spreads at refineries in Europe, the Middle East, and Asia.
Power Generation and Renewables: Renewable Sources Surpass Coal for the First Time
The global energy transition in 2026 reaches a historic milestone: according to the IEA, renewable generation will exceed coal generation for the first time, becoming the largest source of electricity in the world. Global electricity demand is expected to grow by 3.6% in 2026 and 3.8% in 2027 — reaching approximately 30,700 TWh, driven by the electrification of transport and industry, air conditioning, and the rapid expansion of data centers for artificial intelligence. Solar energy will add about 600 TWh of output per year and surpass wind, becoming the second-largest renewable source after hydropower. In the EU, coal's share in generation will drop below 10% for the first time in over a century, while the share of low-carbon electricity will approach 76% by 2027. Demand in China is expected to increase by around 5.5%, while in India, the increase will be about 7%. A specific trend is energy for AI: billion-dollar funding rounds are flowing into energy storage, small modular reactors, and grid infrastructure, while European generators, including nuclear, are raising annual forecasts amid high electricity prices.
Coal: The Paradox of the Energy Transition and Data Center Demand
Despite the records in renewables, coal demonstrates resilience where electricity demand is growing the fastest. In the US, coal generation surged by 13% last year — data centers and expensive gas have brought coal-fired power plants back online and slowed their decommissioning. In contrast, coal production in China and India is declining due to record additions in solar and wind capacity — for the first time in five decades, both countries reported synchronized reductions. Overall, global coal consumption is plateauing: the IEA expects a moderate decline in coal generation up to 2030, while still recognizing its significant role in Asia's energy balance.
What This Means for Investors: Key Indicators for the Coming Weeks
The energy market remains a geopolitically driven landscape. The base case anticipates Brent to hold in the range of $85–92 per barrel with the Strait of Hormuz closed, posing asymmetric upside risk in the event of a breakdown in negotiations and a potential correction to $80 and below if dialogue between the US and Iran progresses. Investors and fuel market participants should monitor:
- The progress of Iran and Oman's negotiations on the phased reopening of the Strait of Hormuz and Washington's rhetoric;
- The pace of gas injections into European storages and TTF dynamics ahead of the heating season;
- The OPEC+ meeting on September 6 and the first signals regarding quotas for 2027;
- The fate of the US sanctions package against Russia's energy sector and the reactions of India and China;
- Weekly EIA reports on US oil and oil product inventories;
- Electricity demand statistics from data centers as a new structural driver for gas, coal, nuclear, and renewables.
Energy markets are undergoing one of the most tense periods in recent years: the military premium in oil, record-low gas inventories in Europe, and a historic shift in global generation leadership are reshaping the energy landscape in which volatility becomes the norm, and energy security emerges as the top priority for governments and companies worldwide.
