Energy & Metals Market Report: Week of July 1-7, 2026

In this week's edition of Data Report, we examine some of the most significant developments in the energy and metals sectors. Our analysis provides insights into the driving factors behind these market movements, offering readers a comprehensive understanding of current trends and future projections.

Hormuz Strait Developments Transform Oil Forecast into a Speculative Game

Energy market research organizations have begun revising their global supply outlooks for 2026 and 2027, with the U.S. Energy Information Administration (EIA) indicating a much slower return to production compared to forecasts from the International Energy Agency (IEA) or Bloomberg NEF.

In their June monthly updates, both IEA and BNEF narrowed their 2026 deficit projections to 900,000 barrels per day (b/d) and 500,000 b/d respectively, both forecasting a 2 million b/d deficit just one month earlier.

Conversely, the EIA states they do not expect the Hormuz recovery to reach pre-war levels until early 2027, projecting global oil inventories will average a 7.6 million b/d draw in Q3 2026.

While all market forecasters expect the 2027 balance to tilt strongly toward a supply surplus, the discrepancies in near-term outlooks are striking.

Reuters' monthly survey of oil price forecasts shows the 2026 Brent crude average price has fallen to $84.50 per barrel this month, down $6 per barrel from May, indicating the analyst community is reacting passively without a true view of what the U.S. or Iran will do next.

Hormuz Traffic Increases, but Shipping Bottlenecks Persist

Oil tanker shipping data has become the most immediate gauge of U.S.-Iran diplomacy, with traffic through the Strait of Hormuz having recovered from March-May levels, though still far from pre-war volumes.

In the week ending June 28, Hormuz transits reached 242 vessels across all tanker types, significantly below the 700+ average of 2025.

The release of nearly 100 million barrels of previously stranded crude has temporarily eased physical market prices, with ICE Brent, Dubai, Murban, and INE Shanghai all moving into contango in recent weeks.

However, up to 9 million b/d of Gulf production could still be shut in as exporters cannot secure enough tankers, indicating recovery will take longer than previously anticipated.

Hiring tankers out of the Gulf remains expensive - while freight rates from the Middle East to China have declined in recent weeks, at $315,000 per day, they remain triple normal market levels.

China's LNG Recovery Faces Hot and Expensive Summer

China's LNG imports have gradually recovered since the U.S.-Iran conflict disrupted global energy flows, with June imports reaching 4.9 million tons, only slightly below the same period last year.

The increase in China's LNG demand stems from domestic production declines due to offshore disruptions and mine maintenance, as well as depleted inventories amid returning heatwaves.

China's gas storage is currently around 45% of capacity, with full refilling hampered by high LNG prices and scorching temperatures, particularly in the south.

Australia's share in China's LNG imports has risen to 36% due to stranded Qatari supply, a record high.

Russia, now China's third-largest LNG supplier, could increase imports in July-September as the Arctic Sea shipping season has opened with 3 LNG carriers already en route to Chinese buyers.

European Aviation Fuel Panic Cools, but Inventories Remain Thin

European aviation fuel prices have now nearly halved from their April 2026 surge, but the Old Continent is still considering the possibility of future supply shortages.

Northwest European aviation fuel prices have fallen to $970 per metric ton (mt) this week, while current prices in the Mediterranean are hovering around $940/mt, just a fraction of the peak $1,842/mt recorded on April 2.

Europe has so far avoided supply shortages, though regional inventories remain extremely thin, with ARA stocks falling to just 554,000 tons in the week ending June 25, 50% below pre-war levels.

The aviation fuel forward curve in backwardation suggests European refiners are confident that summer peak demand will be met, with August contracts trading about $20/mt lower than July.

However, if all vessels currently stranded in the Gulf cannot pass through Hormuz in coming days, sentiment could turn negative again as Europe's September demand remains largely unmet.

East Coast Heatwave Challenges U.S. Power Grid

The scorching heat across the U.S. East Coast could spoil the upcoming Independence Day holiday as electricity prices from New York to Virginia are soaring.

New York day-ahead electricity prices surged above $1,100/MWh on Wednesday as temperatures began rising near 100°F (38°C), marking the most significant pressure on the grid since the Fern Price Storm of winter.

Compounding the electricity shortage, a recently completed power line intended to bring hydropower from Quebec to New York was offline for a day due to "technical issues."

Preliminary data shows the nation's largest grid - PJM Interconnection - surpassed its previous peak load record of 165.5 GW on Thursday, a record that had stood since 2006.

With East Coast data centers increasing grid demand, grid operators are being asked to maintain reliable operation as the Department of Energy allows them to bypass some environmental regulations to continue power supply.

Australia's Gas Drilling Boom Faces Canberra's Gas Retention

Australia's oil and gas exploration spending reached a 10-year high of A$471 million in Q1 2026, just as Canberra sent energy companies into turmoil with its 20% domestic gas reservation rule.

Before re-election in 2025, the Albanese government promised to facilitate new gas supply, acknowledging that Australia would face a regional shortfall by the late 2020s.

After years of drilling primarily focused on onshore fields, activity is increasingly shifting offshore, such as in the Otway basin, however, the largest unexploited resources remain onshore.

Santos, Australia's second-largest producer, is drilling three evaluation wells in the Beetaloo basin, in the country's central-north region, seeking to exploit shale formations using multi-stage fracking technology.

The exploration pace could slow significantly if Canberra's gas regulations scare off investment, with smaller companies particularly cautious about gas reservation requirements.

Guinea-Driven China Bauxite Boom Begins to Fade

China's interest in bauxite imports has begun to wane after an exceptionally strong start to 2026 purchasing, primarily driven by an export boom from Africa's top producer, Guinea.

Guinea supplied 19.61 million tons of bauxite to China in May, accounting for 85% of the country's total imports, as Chinese alumina producers accelerated purchases ahead of potential export restrictions from Guinea.

Market speculation has suggested Guinea might limit bauxite exports at 150-170 million tons per year; however, to date, the African nation has not announced a final framework.

Meanwhile, aluminum prices continue to fall to 5-month lows, with LME 3-month touching $3,040/mt this week on expectations of improved supply once the Strait of Hormuz reopens.

Adding downward pressure, Emirates Global Aluminium of the UAE has announced it will restart production at its damaged Al Taweelah complex earlier than previously anticipated following the drone attack.

Conclusion: Market Uncertainty Persists Amid Regional Volatility

This week's market developments highlight the persistent uncertainty in global energy markets, particularly regarding the Strait of Hormuz situation. While some sectors like European aviation fuel have found temporary stability, others face significant challenges from extreme weather events and policy changes.

The divergence in forecasts among major energy agencies underscores the difficulty of predicting market conditions in this volatile environment. As we move through the third quarter, market participants will continue to monitor geopolitical developments, weather patterns, and policy changes that could reshape the energy and metals landscape.

Stay tuned for next week's edition as we continue to provide comprehensive analysis of these critical market sectors.

#DataReport #Energy #Metals #Oil #LNG #Aluminum #Bauxite #Hormuz #China #Australia #Europe