Week 17 - 21 Aug

Brazil: The 2026 presidential race officially opened on 16 August, with President Lula seeking a historic fourth term against Flavio Bolsonaro, son of former president Jair Bolsonaro. The political climate is already tense: investigations continue into alleged efforts by the Bolsonaro family to hold onto power, while Lula’s son faces a corruption probe. There is also reported US pressure on the Lula administration that aligns with Bolsonaro’s MAGA‑linked political base.

Oil Markets: Crude prices are set to notch a second weekly gain as geopolitical tensions intensify. With Washington signalling what it calls the “toughest sanctions in history” against Iran and Ukrainian drone strikes continuing to disrupt Russian refining capacity, traders have pushed benchmarks higher. Brent is hovering around $94.39, while WTI sits near $87.06. 

The latest rally followed comments from President Trump outlining plans for “economic warfare and isolation on an unprecedented scale” aimed at Tehran. Treasury Secretary Scott Bessent reinforced the message, describing a combined blockade and sanctions strategy intended to severely weaken Iran’s economy. Details of the campaign are expected Monday, with reports suggesting the US will seek support from China — though Beijing’s longstanding opposition to sanctions and its role as Iran’s largest crude buyer make cooperation unlikely. 

Analysts note that both sides appear entrenched, while oil prices continue to climb higher. IG’s Tony Sycamore highlighted the lack of room for delay in a market already reacting to escalating risks. Meanwhile, BMI and Fitch Ratings signalled they will revise their price forecasts upward, citing strong upside potential driven by developments in the Persian Gulf conflict. 

Summary: European gas and LNG markets remain extremely tight, with volatility elevated, prices at multi‑year highs, and storage levels trailing well behind previous years. A mix of geopolitical shocks, supply constraints and structural shifts in Europe’s energy system is shaping a challenging outlook heading into winter. 

1. European Gas Prices Hit Their Highest Levels Since Early 2023 

Spot and forward markets surged this week. Dutch TTF day‑ahead reached €66.23/MWh, the strongest print since January 2023. UK NBP and other continental hubs also posted sizeable gains. Drivers: 

2. Storage Levels Lagging, Raising Winter Security Risks 

EU storage sits well below seasonal norms (67.4% in 2025 and 93.4% in 2024 at this point) creating a widening gap. Germany is at 50.2%, making the 70% target by 1 November increasingly unrealistic. Berlin is preparing targeted interventions if supply security worsens, though officials warn that state action could push prices even higher. Backwardated forward curves continue to discourage summer injections. 

3. LNG Imports Rising, but Storage Still the Critical Constraint 

Germany’s LNG imports are up 37% YoY (5.7 Mt YTD), with a fifth FSRU terminal due online in September. Even so, LNG alone cannot cover winter demand; storage remains the backbone of supply security. Spain’s share of Russian LNG has climbed to 28% (from 18% last year), ahead of the EU’s full ban starting January 2027. US LNG is expected to fill part of the gap, though Middle East disruptions may complicate flows. 

4. Norwegian Gas: Barents Sea Potential Under Threat 

Without new export routes, major Barents Sea resources risk remaining stranded. The Norwegian Continental Shelf could face steep declines from 2030 without freshdiscoveries. Summer maintenance, and any unexpected outages, could tighten European supply further.

5. Turkey’s Regional Flows 

State importer Botas has booked full TurkStream and Turkmenistan capacity for September. No spot bookings were made for Azeri gas, signalling a shift in sourcing strategy. 

Summary: European power markets remain under pressure, with elevated gas prices, constrained nuclear and hydro output, and volatile renewable capture prices all contributing to sustained tightness across the system.

1. Power Prices Stay Elevated Across Europe

Italian baseload front‑month power has climbed above €180/MWh, its highest level since early 2023. Germany is trading above €137/MWh, while France sits near €99/MWh, supported by improving nuclear availability.

2. Nuclear & Hydro: Recovery in France, Structural Shifts in Spain

France: Eight reactors have restarted, lifting nuclear output to a two‑week high after climate‑related disruptions (heat, low river levels, jellyfish blooms) cut production by 7 TWh this summer. Some units will remain offline into September due to river‑cooling constraints, but availability is expected to rebound. Despite challenges, France remained a net power exporter throughout the summer.

Spain: The Almaraz nuclear plant will operate until 2030, reducing gas demand by 7% and improving grid stability. The extension, however, may squeeze solar revenues and slow progress on capacity‑market reforms. Five of Spain’s seven reactors are now expected to stay online until 2044, marking a long‑term shift in the generation mix.

3. Renewables & Storage: Volatile Capture Prices, Battery Recovery

Capture prices for solar and wind remain highly volatile:

4. Carbon & Policy: Stable EUA Prices, ETS Reforms Ahead