Oil prices remained elevated due to ongoing conflict in the Middle East, particularly Houthi attacks on shipping and infrastructure in the Red Sea. With the Strait of Hormuz still disrupted, exporters have increasingly relied on Red Sea routes, making attacks there especially damaging. However, oil prices fell sharply after US officials, including President Trump and Treasury Secretary Scott Bessent, suggested that a diplomatic agreement with Iran might be imminent. Brent crude declined from above USD 90 per barrel to around USD 80 per barrel, while WTI fell to roughly USD 76 per barrel. Despite market optimism, shipping traffic through key chokepoints such as Hormuz and Bab-el-Mandeb remains subdued, reflecting continued uncertainty. Reuters’ survey of economists projects average 2026 prices of USD 85.22 per barrel for Brent and USD 80.14 per barrel for WTI.
On the supply side, OPEC+ agreed to increase September production targets by about 188,000 bpd, marking a sixth consecutive monthly increase and completing the planned unwinding of 2023 voluntary cuts. Nevertheless, war-related disruptions and underproduction by several members mean actual output remains well below targets. The group’s actions signal an intention to raise supply more significantly once geopolitical conditions stabilize.
Demand trends highlight weakness in Germany, where overall energy consumption fell 1.9 per cent in the first half of the year. Oil product demand dropped 8 per cent, led by a more than 30 per cent decline in heating oil consumption, while coal, natural gas, wind, and solar usage increased. Higher prices appear to be encouraging energy conservation and fuel substitution.
Downstream markets were influenced by Ukraine’s intensified attacks on Russian energy infrastructure. Russian crude processing fell to its lowest level in 24 years, with refinery throughput around one-third below seasonal norms. Ukraine struck numerous refineries and export facilities, while Russia extended restrictions on diesel, gasoline, marine fuel, and gasoil exports through January 2027.