Oil Market: Brent Surpasses $84 Amid Hormuz Premium
Oil prices are starting the week on an upward trend. October futures for Brent have increased by about 1%, trading at around $84.4 per barrel, while September WTI contracts are around $78.8. The spread between benchmark grades remains wide: Middle Eastern risks weigh more heavily on barrels linked to Brent than on American production. The fluctuation range of Brent over the past 52 weeks, from $58.7 to $126.4, clearly demonstrates how sharply the oil market has overestimated the geopolitical premium throughout the year.
Key pricing factors for this week include:
- Hormuz Factor: The six-month conflict between the US and Iran keeps the market tense - shipping through the strait, critically important for global oil and LNG supplies, remains limited and risky.
- Attacks on Shipping: Reports of attacks on vessels in the strait and ongoing actions by the Houthis in the Red Sea support the risk premium in freight and insurance.
- Inventories and Demand: Global commercial oil inventories have been depleted for months due to export disruptions from the Persian Gulf, limiting the potential for price declines even amid weak macro data.
OPEC+: Return of Voluntary Cuts Completed
At the meeting on August 2, seven countries of the alliance - Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman - agreed to increase quotas by 188,000 barrels per day starting in September. This marks the sixth consecutive increase, completing a phased return of 1.65 million bpd of voluntary cuts introduced in 2023. Additionally, a separate package of restrictions, approximately 2 million bpd, implemented since 2022, will remain in place until the end of 2026.
Three points are critical for market participants in the energy sector:
- The increase in quotas is largely symbolic: due to attacks on energy infrastructure and logistical constraints, actual production levels in several countries lag behind permitted levels.
- Analysts expect a pause in quota changes until the end of the year - the next meeting is scheduled for September 6, with attention shifting to revising baseline production levels for 2027, where Iraq is already pushing for an increase in its share.
- Potential de-escalation in the Middle East could quickly return significant volumes to the market, shifting the balance towards surplus - this scenario is included in models by all major investment houses.
Geopolitics: Negotiations over the Hormuz Strait - Mixed Signals
The diplomatic intrigue surrounding the strait remains a key driver of volatility in energy markets. The US administration claims that an agreement to restore shipping is close, while Qatari mediators speak of a prepared draft of agreements. However, Iran's foreign minister stated that direct negotiations with the US are not currently taking place, and the terms of transit published by Tehran are tougher than market expectations: a ban on the passage of US and Israeli vessels, restrictions for "hostile" countries, and fines for violators. The parties remain far from a compromise, sanctions and military pressure persist, and every news item regarding the talks is immediately reflected in oil and gas prices.
Gas Market: Europe Enters Winter with Minimal Reserves
The European natural gas market is experiencing its tightest summer season in recent years. TTF hub prices fluctuate in the range of €52–57 per MWh – approximately twice the levels seen at the beginning of the year. Underground gas storage in the EU is filled to only ~58% - the lowest level for August in nearly two decades, compared to a five-year average of over 70%.
- Reduced Target Benchmark: The mandatory filling level for gas storage by November 1 has been lowered from 90% to 80%, but achieving it will still require accelerated injection by the end of the season.
- LNG Shortage: Shipments of liquefied natural gas from Qatar through the Hormuz Strait are delayed, and LNG imports to Europe are significantly trailing behind multi-year averages.
- Competition with Asia: The hot summer in the Asia-Pacific region is intensifying the competition for available LNG cargoes, supporting global gas prices.
- Weather Factor: Abnormally high temperatures in Central and Southern Europe are driving up demand for electricity for air conditioning, slowing down inventory builds.
The potential opening of the Hormuz Strait could quickly cool the gas market – that’s why TTF prices sharply reacted last week to news about the negotiations, dropping to three-week lows and then rebounding.
Power and Renewables: Record Solar Generation on Both Sides of the Atlantic
The global energy transition continues to gain momentum despite geopolitical turmoil. By the end of 2025, renewable energy sources are expected to surpass coal in the global energy mix for the first time in a century, accounting for over a third of electricity generation. This trend is expected to strengthen in 2026:
- Solar generation in June covered about a quarter of electricity consumption in the EU for the first time;
- In Germany, the share of renewables in generation reached nearly 62% in the first half of the year - a historical high;
- California and Texas have repeatedly set records for solar generation and discharging industrial batteries this summer;
- China maintains its global leadership, accounting for more than half of the global increase in solar capacity.
At the same time, the sharp increase in electricity consumption from data centers and the AI industry is becoming a structural demand factor, supporting investments in both renewables and storage, as well as in gas and nuclear generation.
Coal: Asian Heat and Supply Disruptions Keep Prices Near Annual Highs
The thermal coal market remains strong. Newcastle futures are trading in the range of $127–130 per ton – about 16% higher than a year ago. Prices are supported by a heatwave in China, which has increased demand for coal-fired power plants, disruptions in barge shipments in Indonesia due to low river levels, and production restrictions in China following heightened safety inspections in mines. A counteracting factor is India: coal production in the country rose by more than 7% year-on-year in July, reducing its need for imports. Overall, coal continues to play a key role in Asia’s energy balance, serving as a backup for energy systems during peak demand periods.
Russian Oil Products Market: Acute Phase of Crisis Passed
The domestic fuel market in Russia is gradually emerging from the most severe crisis in recent years, caused by drone attacks on oil refineries and declining gasoline and diesel production. According to the Ministry of Energy, the situation has stabilized: regions are gradually lifting fuel sales limits at gas stations, and queues are decreasing. Contributing to the stabilization are:
- A complete ban on gasoline and diesel exports, which keeps resources within the country;
- Record imports of motor gasoline from Belarus and exploration of additional external supplies;
- Accelerated restoration of damaged refining capacities;
- Heightened government control over fuel distribution and exchange trading.
The downside of normalization is significantly higher prices for petroleum products, which are already being reflected in logistics costs and overall inflation. Experts link the complete recovery of market balance with the conclusion of refinery repairs and the end of the peak demand season.
Week’s Calendar: What Investors Should Watch
- US - Iran Negotiation Track: Any statements regarding the parameters for opening the Hormuz Strait are the main trigger for oil, gas, and freight rates.
- IEA and OPEC Reports: August reviews will clarify the balance of supply and demand in the oil market for the second half of the year.
- US Inventory Data: Weekly EIA statistics will show the resilience of American gasoline demand during the peak driving season.
- Gas Injection Rates into EU Storage: Any lag behind schedule will increase the winter premium in TTF prices.
Conclusion: The Energy Market Awaits a Resolution
Energy markets are balancing between two scenarios. Successful negotiations regarding the Hormuz Strait could return millions of barrels of Middle Eastern oil and cargoes of Qatari LNG to the market, triggering a correction in oil and gas prices. Conversely, a protracted conflict would cement the high risk premium and complicate Europe’s preparations for the heating season. OPEC+, having completed the return of voluntary cuts, is taking a wait-and-see approach, while structural trends - record renewable energy production, increased demand from data centers, and coal's resilience in Asia - continue to reshape the global energy landscape. For investors and energy market participants, the coming weeks will be a test of readiness for sharp price reversals in either direction.
