Energy market analysis 3 June, 2026

Why oil is sitting near $100, not $150

Three months into a near total closure of the Strait of Hormuz, with a shock on the order of 20% of global oil supply and roughly 11 million barrels a day of Gulf crude and condensate curtailed, Brent is trading only a little above $100. That is a level most analysts would have found hard to believe, and it sits well short of the highs after Russia’s 2022 invasion of Ukraine and the records set before the 2008 financial crisis. The physical arithmetic says prices should have spiked, so why have they not?

The market has leaned on a stack of temporary shock absorbers, namely drawn down commercial and floating storage, OPEC spare capacity, and a little demand adjustment. Early on these cushions were unusually deep. The IEA noted that just after the closure, with few outlets for cargoes, floating storage in the Middle East actually rose by around 100 million barrels. That picture has since reversed, with independent trackers showing floating volumes falling steadily, and the Atlantic Council judged that the buffers built from sanctions waivers and floating storage were largely exhausted by late April. Spare capacity looks reassuring on paper, but Saudi Arabia and a handful of others cannot fully or instantly replace lost Persian Gulf exports, and every barrel drawn down narrows the room for the next shock.

This is what makes the current calm misleading. A stable price reflects the system’s ability to absorb the first hit, not its ability to hold that balance over time. Brookings frames the real risk as the moment the market concludes those buffers are running out, at which point standard demand elasticities suggest prices could move toward $150 fairly quickly, not because something new has happened but because the cushions are gone. The physical market is already hinting at it, with the IEA reporting physical cargoes trading near $150 even while futures stayed far lower, an unusually wide disconnect.

From here the path splits on one variable above all, the duration of the closure, which Wood Mackenzie calls the single defining factor. If the Strait reopens and flows partly restore, inventories can rebuild and prices may stabilise or ease, though a quick return to pre war levels looks unlikely. If the disruption drags on, the buffers erode further and the market is eventually forced to reprice what supply remains, far more aggressively. The Atlantic Council put the choice bluntly, that the world can ration demand now or pay a much steeper price later.

For anyone exposed to oil prices, whether directly or through fuel costs passed along a supply chain, the takeaway is that today’s relatively contained price is a function of buffers, not of a solved problem, and buffers are a wasting asset. The risk is asymmetric, with limited movement while the cushions last and sharp upside if they run dry before the Strait reopens. That argues for treating current levels as a planning floor rather than a settled ceiling when budgeting or hedging through the rest of 2026.

Crude Oil Price – Brent July 2026 ($/barrel) – week cloud candle, log scale

Data centres on course to consume up to a third of US commercial power

In its Annual Energy Outlook 2026, the EIA projects that data centre servers, which made up roughly 7% of commercial sector electricity in 2025, will grow to between 22% and 33% of commercial building electricity use by 2050. In absolute terms that is a climb to somewhere between 446 and 818 billion kilowatthours a year.

The top of that range is the agency’s High Electricity Demand case, and the assumptions behind it are striking. It takes the installed stock of AI servers growing on “an exponential trend through 2050” with no efficiency gains beyond historical norms, which pushes server use to 818 billion kilowatt hours, more than sixteen times the 2020 level. Standalone data centres alone account for about 581 billion of that, and cooling compounds the picture, since the EIA assumes data centre floorspace can be up to 2.9 times as cooling intensive as ordinary commercial space, adding a further 84 billion kilowatthours in the high case.

Zoomed out, the trend reshapes overall demand. The EIA sees US electricity consumption rising 0.9% to 1.6% a year through 2050 with data centres a major factor, after the past five years averaged 2.1% growth, a sharp break from fifteen years of almost flat demand. Commercial buildings, where most data centre activity sits, grow faster than the residential or industrial sectors in every modelled case. The upshot is that commercial electricity intensity is set to pass its 2003 record of 14.9 kWh per square foot, roughly 160 kWh per square metre, as early as 2031 or 2032.

(12 square feet = 1.1 square meters)

The EIA is careful with caveats, noting that its baseline case, built on laws as of December 2025, “should not be regarded as the most likely of the cases.” And even where it models servers becoming around 10% more efficient every three years after 2040, the sheer growth in installations keeps total consumption climbing.

These are US figures, but the force behind them is not bound to one market. The same AI and data centre load is lifting European power demand, feeding directly into the grid congestion and baseload price pressure building across the region. It is a useful reminder that forward power and connection capacity are becoming strategic questions here too, not routine line items for any energy buyer.

Price Baseload Electricity delivery year 2027 (eur/MWh) – week cloud candle, log scale

Europe’s gas buffer cannot absorb another three months of Hormuz

Senior executives at Equinor have warned that Europe could face a critical shortfall in gas if disruptions through the Strait of Hormuz continue for another one to three months. The concern is timing. Europe came into the summer refill season with stores only 28% full after a long winter, and although levels have recovered to 35% to 37%, that is well short of the 50% seasonal norm and leaves the usual 90% winter target looking hard to reach. For now the market is calm, with Dutch TTF hovering near €50/MWh in late May, down sharply from a March peak of €74/MWh, its highest since January 2023.

Refilling is unusually difficult this year for two reasons. First, the starting point was dire, with Dutch reserves falling to just 5.8% of capacity by the end of winter, the lowest in a decade, and northwest Europe as a whole dropping below 30%. Second, the price structure works against storage, since summer spot prices have been sitting above winter contracts, an inverted curve that removes the normal incentive to inject now and sell later, while LNG disruptions, strong Asian demand and distorted pricing have made cargoes scarce and expensive.

Policymakers are adjusting. EU Energy Commissioner Dan Jorgensen has asked member states to consider lowering their filling target to 80% early in the season to reassure the market. Approaches diverge, with Italy leaning on financial support for traders while Germany relies on regulatory mandates passed to wholesale participants. In Germany industry has called for a national strategic reserve, with the energy and water association BDEW warning through its chair Kerstin Andreae that the storage decline is “far more severe than politics has so far admitted.”

Equinor frames it as two paths. A quick resolution could still get Europe to a manageable 75% by the end of the injection season, while a one to three month blockage would turn critical and could push TTF toward €90/MWh. At that level the company expects a market correction of roughly 10 billion cubic metres less gas burned for power, plus more industrial fuel switching. For perspective, though, the situation is still nowhere near as severe as the shock that followed Russia’s invasion of Ukraine.

Because TTF is the benchmark that European gas and power costs ride on, this is a question for anyone exposed to the region’s energy, from large industrial buyers to smaller operators. The setup is asymmetric in the same way as oil, contained around €50 today but with real upside toward €90 if the Strait stays shut into the autumn while storage is still low. That puts the timing of injections, hedging cover and any fuel switching options on the table now, not in the depths of winter.

Price TTF gas delivery year 2027 (eur/MWh) – day cloud candle, log scale

India sets a power demand record as heat drives coal harder

India’s electricity demand hit an all time high on 21 May, when peak demand reached 270.82 GW as temperatures in New Delhi touched 45.3°C, the fourth consecutive day of record highs during solar hours. The power ministry said the load was “successfully met” and called it a new high in peak demand met, surpassing the previous day’s 265.44 GW. The surge was tied directly to heavier use of cooling appliances.

Coal did most of the heavy lifting. Thermal generation, overwhelmingly coal fired, covered about 62% of demand, with solar at 22% and hydro and wind around 5% each. With the heat expected to persist, India’s coal demand from power plants is forecast to rise 11.5% over the April to June quarter.

The harder problem is timing rather than total capacity. Demand is increasingly peaking in the evening, just as solar output fades, and although the national grid met the record, several states such as Uttar Pradesh and Uttarakhand still saw localised outages, a gap between generation and local distribution. Thermal plants are being run harder to bridge that evening shortfall, and analysts argue the answer lies less in adding capacity than in smarter grid management, including time of day pricing and smart metering.

The longer arc points the other way. India plans to quadruple solar capacity and triple wind within a decade under its Central Electricity Authority adequacy plan, but the grid is lagging the build out, with roughly 300 GWh of clean power curtailed in the first quarter alone. For now coal remains the backbone, at around 60% of total generation.

The general read is that India, the world’s third largest emitter, is a genuine swing factor in both global coal demand and emissions. This episode is a clean illustration of the tension running through the whole transition, with ambitious renewable targets on one side and the reliability pull of dispatchable coal under climate stress on the other. For anyone tracking coal prices or carbon markets, the direction of that tug of war in fast growing economies matters as much as anything happening in Europe.

Price ICE Coal delivery year 2027 (usd/t) – week cloud candle, log scale

EU weighs widening its carbon market to international flights as airlines come under pressure

European aviation is having a hard year. Lufthansa permanently grounded its 27 aircraft regional unit CityLine on 18 April 2026 and cut around 20,000 summer flights, while low cost carrier Ryanair is scaling back in Germany, leaving airports under pressure and tens of thousands of jobs exposed. The immediate driver is fuel, not policy, with jet fuel prices roughly doubling since the Iran conflict began on 28 February and European jet fuel hitting a record near $1,840 per tonne in early April. Lufthansa’s finance chief Till Streichert was candid that CityLine had been under consideration before the conflict and that the crisis simply forced the move earlier than planned.

Against that backdrop sits a separate policy question. The European Commission has proposed extending the EU Emissions Trading System to international flights departing the bloc, a change that could take effect from 1 January 2027 if adopted, with an estimated €11 billion to €13 billion in revenue at stake.

An extension of the CO₂ regime to include international airline tickets would increase prices by up to 15% in the first year. Combined with annual price increases due to the decreasing supply of CO₂ certificates, a trip abroad will soon become a luxury.

The industry is far from united on it. Legacy carriers such as Lufthansa and Air France-KLM have opposed extending the ETS to all international flights, and have fought over the phase out of free allowances and the overlap with the global CORSIA scheme. Others pull the other way, with Schiphol Airport, Wizz Air and fuel supplier SkyNRG backing a wider scope on the argument that it would give regulatory certainty and unlock climate finance. That split is the real story, rather than any single villain.

The general takeaway is about direction of travel. Even with the airlines’ lobbying, the structural path for the ETS is a shrinking supply of allowances and a steadily broadening scope. For any sector with carbon exposure, that points to firmer allowance prices over time and a widening set of activities that have to carry a carbon cost, which is worth factoring into planning well before any 2027 start date.

Price Emission Allowances – Dec-26 contract EEX (eur/t) – week cloud candle, log scale

India leans on biogas and new suppliers as the oil shock bites

Prime Minister Modi has urged his government to urgently expand alternative energy, including biogas as a substitute for LPG, as the Iran war chokes supply to the world’s third largest crude importer. The directive came at a Council of Ministers meeting following his tour of the UAE and four European countries, where the West Asia crisis dominated talks, and he paired it with a push on electric vehicles and public transport.

Cooking gas is the sharpest pressure point, since India imports roughly 65% of its LPG, mostly from West Asia, and most of those cargoes pass through Hormuz. That combination means even short disruptions bite quickly, and households are already feeling it, with petrol and diesel up by around ₹3 a litre.

The workarounds are costly. India has boosted Russian crude imports under US sanctions waivers, sought crude and LPG from outside the Middle East including the US and Canada, and even floated sending empty tankers into Hormuz to load Gulf oil, though these routes typically cost more and take longer than the direct Persian Gulf run. Exposure remains high, with about 52% of India’s roughly 5 million barrels a day of crude imports still transiting the strait, even as the government insists it has “ensured both availability and affordability” by diversifying its sources.

On the ground, the crisis is reviving homegrown options. Biogas is regaining attention as a practical LPG alternative in states such as Kerala, Gujarat and Maharashtra, with demand rising even if limited subsidies still cap adoption.

The general read is that a single chokepoint can turn a distant conflict into kitchen table inflation, and that import dependent economies are using the moment to harden their resilience. The lesson travels well beyond India, since security of supply is climbing back up the agenda everywhere, and shocks like this tend to accelerate the shift toward domestic and alternative energy rather than stall it.

Additional charts

Amid the supply disruption in the Middle East, Japanese oil imports have crashed by 66% in April compared to the same month last year, a new record low.

Source: Tsvetana Paraskova, OilPrice.com

Total U.S. crude oil inventories, including the SPR (Strategic Petroleum Reserve), are at their lowest level since June 2025, with recently the largest SPR + Commercial Withdrawal in history…

This newsletter contains COMCAM’s own analysis and commentary, which is COMCAM’s copyright and may not be reproduced without permission. Factual data and any third party quotations remain the property of their original sources, which are linked throughout.