Key Highlights for Early Morning, Wednesday, July 29, 2026
- Oil. Near-term Brent futures are trading around $86–87 per barrel, while WTI is about $81. Both benchmarks dropped approximately 8% on Monday, marking the largest single-day decline in several months.
- Geopolitics. The U.S. has paused its series of nighttime strikes on Iran; Washington cites a "pause for negotiations," while Tehran has yet to confirm any concessions.
- Logistics. Net oil and petroleum product exports through the Strait of Hormuz for the week ending July 24 averaged about 2.9 million barrels per day, down from 5.9 million b/d the previous week.
- Gas. The spot TTF peaked at around ~$744 per thousand cubic meters compared to ~$532 on average for June—its highest since December 2022.
- Electricity and Renewables. Solar generation has, for the first time, provided around 25% of electricity output in the EU, surpassing nuclear, gas, and wind.
- Russia. The ban on gasoline exports has been extended until the end of 2026, and the import cap has been expanded to include diesel fuel.
Oil: Market Reduces Geopolitical Premium
The key focus of the oil market is the speed at which the geopolitical premium is diminishing. On July 23, Brent reached a six-week high amidst the twelfth consecutive nighttime strike by the U.S. on Iranian facilities and escalating tensions in the Red Sea. Following news of the pause in strikes, prices opened the week with a sharp decline: first to $86.8, and then below $85—marking their lowest point since July 17. By Monday evening, the market regained some losses; however, the decline continued into Tuesday, and by Tuesday–Wednesday, oil stabilized near three-week lows.
Fundamentally, the market is being tugged by three forces:
- Diplomatic Hope. The pause in strikes is interpreted by traders as an opportunity for negotiation and a precursor to unlocking shipping routes.
- Physical Shortage. Supplies through Hormuz remain half the norm, while insurance rates for vessels in the risk zone are exponentially higher than pre-war levels.
- Return of Supply. The partial return of Iranian barrels to the market intensifies competition for Asian buyers and exerts pressure on differentials.
Analysts at investment banks previously raised their Brent forecast for 2026 to $85, accounting for prolonged disruptions in the Strait. The current de-escalation positions this forecast as more of an upper boundary than a lower one.
The Strait of Hormuz and Red Sea: Bottleneck for Global Energy
Before the conflict, the Strait of Hormuz accounted for about a quarter of maritime oil trade and approximately 20% of global LNG. Today, traffic has only partially recovered: tankers predominantly navigate the northern corridor along the Iranian coast, with flow rates fluctuating week by week.
Concurrently, a second route has worsened. Yemeni Houthis reported attacks on the East-to-West oil pipeline, which connects Saudi Arabian fields to the port of Yanbu on the Red Sea, along with strikes on infrastructure in the Jazan region. This pipeline serves as a primary bypass in the event of Hormuz blockage, so any prolonged outages immediately reintroduce risk premiums into oil and freight prices.
OPEC+: Quotas Rising, Actual Production Lagging
Formally, the alliance continues its course of easing restrictions. The total ceiling for the "Big Seven" key participants in July has been raised to 30.633 million b/d, up from 29.548 million b/d in June. However, actual production levels are far from the permitted amounts:
- Saudi Arabia was about 3.44 million b/d below its quota;
- Iraq was 2.38 million b/d below;
- Kuwait was 1.18 million b/d below;
- Russia produced 8.928 million b/d in June, falling short of its plan by 834,000 b/d;
- Kazakhstan, in contrast, exceeded its quota by more than 1.15 million b/d.
The lag of Middle Eastern participants is explained not by discipline but by the physical impossibility of exporting the crude. The exit of the UAE from OPEC and OPEC+ as of May 1 has further reduced the manageability of the deal. The practical implication for the market is that the alliance holds significant latent export potential, which will flood the market immediately following the normalization of shipping—this poses the main medium-term bearish factor for oil.
Gas and LNG: Europe Pays for Delays in Injection
The European gas market is moving in opposition to oil. By July 19, EU underground storage facilities were filled to about 54% (around 57.7 billion cubic meters)—nearly 16 percentage points below the five-year average. Injection rates are slowing: in June, daily replenishment averaged around 308 million cubic meters, while July saw about 270 million cubic meters compared to 338 million cubic meters the previous year.
Why Gas Prices are Rising
- LNG imports in July could drop to about 6.5 million tons—the lowest in two years and a decrease of about a quarter year on year;
- Asia is buying up available shipments: for the Asia-Pacific region, it's a matter of current consumption; for the EU, it's about reserves;
- Qatar is gradually restoring shipments from Ras Laffan and promises to return the majority of its capacities within two months after the complete opening of the strait;
- Starting January 1, 2027, an EU ban on imports of Russian LNG under long-term contracts will come into effect, and pipeline gas imports will be banned starting September 30, 2027.
Conservative estimates suggest that by early November, EU underground storage may reach only about 75% capacity—close to a historical minimum. This keeps the premium in winter contracts and renders European industry structurally vulnerable for yet another heating season.
Coal: Correction After Escalation
The coal market is adjusting to the volatility in the oil and gas sector with a lag. In mid-July, European energy coal indexes strengthened above $118 per ton following oil and gas prices. However, last week, prices corrected downwards across Europe, China, and Australia. Stockpiles at the nine largest ports in China remain around 29 million tons, which limits growth potential.
For Russian exporters, the situation is dual-faceted. Transshipment through Black Sea and Azov Sea ports increased by 21.5% in the first half of the year, reaching 13.9 million tons, supporting overall exports. However, sanctions, high rail tariffs, and a strengthening ruble are squeezing margins, while competition for Turkish and Asian markets is intensifying. The long-term benchmark is set by China's five-year energy development plan for 2026–2030: demand for coal and oil is expected to peak within the next five years, after which they will transition to the status of reserve sources.
Electricity and Renewables: Record Solar Generation and High Evening Prices
In June, solar power plants first accounted for about 25% of electricity generation in the European Union, surpassing nuclear, gas, and wind; monthly records were broken in 18 EU countries. On certain days, the share of renewable energy sources in Germany approached 74%, while solar generation reached 37.5%.
The downside of these records is the growing volatility in electricity prices. The shortage of storage systems means that daytime surpluses are lost, while evening peaks are covered by expensive gas and coal generation. An additional factor is restrictions on French nuclear power plants due to river water temperature during periods of heat. For investors, this shifts the focus from the introduction of new renewable capacity to networks, battery storage, and flexible demand.
Russia: Fuel Market, Refineries, and Dampening Measures
The domestic market for petroleum products remains under manual control. The current package of measures includes:
- A complete ban on gasoline exports, extended until the end of 2026;
- A ban on the export of diesel fuel, marine fuel, jet fuel, and gasoil;
- A reduction in the mandatory exchange sale of gasoline from 15% to 10% for the period from July 1 to September 30;
- Maximized refinery loads, shortened current maintenance times, and postponed planned maintenance;
- An import damping mechanism, expanded in July to include gasoline, and following amendments to the Tax Code, also to diesel fuel and middle distillates (valid until July 2027);
- Nullified import duties and increased supplies from EAEU countries.
A mechanism for offsetting direct contracts when calculating exchange norms is also being prepared—authorities hope to reduce the risk of local shortages in regions.
Export of Russian Oil: Discounts vs. Budget
Physical volumes of Russian oil exports are near their highest since the beginning of the year, but the price component is deteriorating. The discount for Urals in the first half of July rose by about $3 per barrel compared to June; on an FOB basis in Baltic ports, the spread to Dated Brent was estimated in the range of $25–28 per barrel against a five-year average of around $19.8. The average price used for calculating mineral extraction tax was about $50.4 per barrel in July compared to $63.5 in June.
Considering that the budget was drafted based on Urals at around $59 per barrel, and the deficit has already significantly exceeded the annual target, the decline in prices in July will affect treasury revenues in August. The return of Iranian barrels to the Indian market intensifies competition and increases the likelihood of further discounts.
What Industry Participants Should Monitor in the Upcoming Sessions
- Format of US-Iran negotiations: Confirmation of direct contacts could push Brent into the $75–80 range.
- Dynamics of transportation through Hormuz: A return to 5–6 million b/d would signal the end of the supply crisis.
- Houthi attacks on Saudi infrastructure: Strikes on Yanbu and the East-to-West pipeline would instantly reintroduce risk premiums.
- Injection rates into EU underground storage: Delays in August would mean an expensive winter and high TTF.
- Recovery of LNG shipments from Qatar: A key factor for balancing Europe and Asia.
- OPEC+ decisions on September quotas and the actual capability of participants to meet them.
- Russian exchange quotations for gasoline and diesel amidst extended export bans and damping measures.
The conclusion for investors and industry participants is that oil is entering a phase of price normalization while logistics remain abnormal, gas continues to be the most strained segment of the global energy market, coal is trading sideways, and electricity generation is increasingly dependent on network flexibility rather than installed capacity. Any of the aforementioned points has the potential to shift the entire configuration of the raw material and energy market in a single session.
