Oil Market: Geopolitical Premium Rapidly Deflates
Oil prices are undergoing a rapid reassessment of risks. Following reports that Washington has refrained from launching new strikes on Iranian targets and parties agreed to suspend retaliatory actions, the market began aggressively pricing in the scenario of normalization of shipping in the Persian Gulf. October futures for Brent, which were recently trading around $90 per barrel, plummeted by more than $6 on Monday and stabilized around $85 by Tuesday morning. American WTI is holding steady near $81 per barrel.
Key factors affecting the dynamics of the oil market this week include:
- De-escalation in the Middle East: the prospect of reopening the Strait of Hormuz suggests a return of significant volumes of Middle Eastern oil to the market and the easing of the risk premium, which had kept prices above $90 for months.
- Surplus forecasts: analysts expect a noticeable oversupply in 2026, with U.S. production remaining at record levels, Brazil achieving a historic production high in June, and a loosening of sanctions on Iran adding additional barrels to the market.
- Weak demand: the recovery of consumption in Asia is slower than expected, and the high prices during the first half of the year have spurred energy conservation and a switch to alternative sources.
For traders and oil companies, this means high volatility: any disruption in negotiations could send prices back to $90, while a confirmed reopening of the strait would pave the way for further corrections.
OPEC+ Concludes Production Increase Cycle
The OPEC+ alliance, which will operate in a "seven-member" format (Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman) starting May 1, 2026, after the UAE's departure, has agreed on a final increase in quotas. The main parameters of the decision are as follows:
- From September onwards, total production will increase by another 188,000 barrels per day— the same step taken in June, July, and August.
- This move concludes the process of lifting voluntary restrictions of 1.65 million barrels per day, imposed in 2023; from February to August, quotas have already increased by about 940,000 b/d.
- After September, the alliance will take a pause: challenging negotiations on baseline production levels for 2027 are ahead, assessing the actual production capacities of each participant.
Simultaneously, OPEC+ has warned of threats to energy supply due to attacks on infrastructure and confirmed its readiness to slow down or halt production increases if market balance deteriorates. The coincidence of the final quota increase with a potential reopening of the Strait of Hormuz amplifies bearish risks for oil prices in the second half of the year.
Strait of Hormuz: First Phase of the Major U.S.-Iran Deal
The U.S. President has announced that Washington and Tehran are discussing the full restoration of shipping through the Strait of Hormuz in the coming days, calling this the first phase of negotiations, followed by discussions on Iran's nuclear program. Iran, in turn, officially denies direct contacts with the U.S. and emphasizes that consultations are only taking place with Oman—regarding a temporary safe route and management mechanisms for the strait. The contentious issue remains the toll for passing vessels: Tehran insists on its control over the artery, while the U.S. states it will not allow tolls to be imposed.
Under normal conditions, approximately one-fifth of global oil supplies and a significant share of Qatari LNG pass through the Strait of Hormuz; therefore, the outcome of the negotiations will determine the trajectory of both oil and gas prices until the end of the year. The market is pricing in an optimistic scenario, but the experiences of recent months—with the breakdown of the ceasefire in July—remind us of the fragility of any agreements.
European Gas Market: Low Stocks and Expensive Gas
The European gas market is in considerably worse shape than a year ago. September futures at the TTF hub are trading around $696 per thousand cubic meters, which is almost one and a half times higher than levels from the previous year. The fill level of European underground gas storage facilities at the beginning of August is only about 57%, compared to over 85% at the same time last year, and market participants are increasingly discussing the risk of not meeting targeted stock levels before the heating season.
Reasons for the tension in the EU gas market:
- Shortage of Middle Eastern LNG supplies due to the blockade of the Strait of Hormuz;
- Intense price competition with Asian buyers for available LNG shipments;
- Gradual phasing out of EU dependency on Russian gas: restrictions on spot LNG have been in place since April 2026, and a ban on short-term pipeline contracts since mid-June.
LNG: Imports to Europe Fall to Two-Year Low
In July, LNG supplies from terminals to the European gas transportation system amounted to approximately 8.4 billion cubic meters—a 17% decrease from June and 26% lower than in July of the previous year. This is the lowest monthly volume in nearly two years. From January to July, about 81.1 billion cubic meters entered the network, which is 2.5% less than the levels seen in 2025. Terminals are operating at partial capacity, and some contracted volumes are being redirected to premium Asian markets. The potential reopening of the Strait of Hormuz and the return of Qatari volumes could change the situation, but the effect will not be felt until at least the fall—during the peak gas storage injection campaign.
Electricity and Renewables: Renewable Generation Surpasses Coal
Against the backdrop of gas shortages, the global energy transition is accelerating. According to the International Energy Agency, 2026 will mark the year when renewable energy sources will first surpass coal in terms of global electricity generation. Electricity production from renewables is expected to increase by more than 8%, while their share in the global energy balance will grow from 33% to 37% by 2027. Solar power remains the driving force: an additional 600 TWh of generation is anticipated for the year, which will position solar as the second-largest renewable source after hydroelectric power. The LNG supply crisis and high gas prices further enhance the investment appeal of solar power plants and energy storage systems, reducing importing countries' dependence on volatile fuel markets.
Coal: Temporary Reliance Amid High Gas Prices
The coal sector is reaching a symbolic milestone—while losing its lead to renewables in global generation, it remains critically important for Asia's energy security. High prices for gas and LNG are sustaining demand for thermal coal in China, India, and Southeast Asia, where coal-fired power plants meet peak summer loads. For exporters—Indonesia, Australia, Russia, and South Africa—this means stable sales; however, the medium-term trend is clear: coal's share in the global energy balance will decrease as new renewable and storage capacity comes online.
Russian Fuel Market: Gasoline Export Ban Extended Until 2027
The domestic market for petroleum products in Russia remains in a state of acute imbalance. The government has extended the complete ban on gasoline exports until January 31, 2027—this measure applies to both producers and traders. The situation in the regions remains complicated:
- Queues at gas stations, fuel dispensing limits, and local shortages of AI-95 are reported in several regions;
- Retail prices in some areas have exceeded 100 rubles per liter;
- Refining has dropped to minimal levels in several years due to unscheduled plant shutdowns caused by drone attacks;
- The deficit is partially filled by supplies from Belarus, as well as purchases from India and Kazakhstan;
- The expansion of export restrictions to diesel fuel is under discussion, and the Federal Antimonopoly Service has intensified inspections of oil traders.
Experts do not anticipate a rapid decline in prices: the extension of the embargo is likely to reduce the volatility of wholesale quotations, and significant improvements to the balance may not occur before the fourth quarter—provided that refining capacities are restored.
What This Means for Investors: Key Benchmarks for the Week
Wednesday, August 5, 2026, promises to be one of the defining days for the commodity and energy sectors. Investors and energy market participants will be focused on:
- The progress of U.S.-Iran negotiations and official announcements regarding the status of the Strait of Hormuz—this will be the main driver for Brent and WTI prices;
- The reaction of the gas market: the dynamics of TTF prices and the pace of gas injection into European UGS;
- Signals from OPEC+ regarding parameters for the 2027 deal following the final increase in quotas in September;
- The development of the fuel crisis in Russia and potential new regulatory measures;
- Corporate reports from major oil and gas firms, confirming the sector's resilience to price volatility.
The baseline scenario suggests that, with confirmation of de-escalation, Brent will continue to drift toward $80 per barrel amid growing supply, while the European gas market will remain expensive at least until the return of Middle Eastern LNG supplies. For long-term investors, a key structural trend remains the acceleration of the energy transition: 2026 will go down in history as the year when renewable energy sources first surpassed coal in global electricity generation.
