05 Aug 2026
US energy market commentary, July
Rob Palmer
Head of Energy Futures Clearing Sales, North America
Sasha Foss
Energy Markets Analyst, CSC Commodities
Oil prices rise as Middle East tensions escalate
On 1 July, the ICE Brent front-month futures contract, the international oil benchmark, settled at $71.57 per barrel. This price was the lowest since before the war between US and Iran began. Prices subsequently rebounded, briefly exceeding $100/b on 23 July before remaining volatile through the rest of the month.
The renewed exchanges between the US and Iran have increased uncertainty across energy markets and cast doubt on the Memorandum of Understanding between the two countries. Meanwhile, the Iran-backed Houthi rebels in Yemen have imposed a maritime embargo on Saudi oil shipments through the Bab al-Mandab Strait, a key route linking the Red Sea and the Indian Ocean.
As a result, vessels are being forced onto longer alternative routes, increasing voyage times by as much as 25 days and raising transportation costs. The disruption also reduces the effectiveness of Saudi Arabia’s efforts to bypass the Strait of Hormuz via its 7 million b/d East-West pipeline, creating additional logistical challenges for crude exports.
Elsewhere, Ukrainian drone strikes on Russian refineries and the Caspian Pipeline Consortium (CPC) terminal continue to disrupt exports of Russian refined products and Kazakh crude. In response, Russia has extended its diesel export ban through August.
US Strategic Petroleum Reserve falls to 43-year low
The US Strategic Petroleum Reserve (SPR) has fallen to its lowest level since 1983, according to data published by the US Energy Information Administration on 29 July.
SPR inventories declined by 3.8 million barrels during the week to 307.65 million barrels and have fallen by approximately 108 million barrels since late March. Releases from the SPR, combined with strong export activity and refinery utilisation rates of around 97%, have helped ease pressure on global oil markets following the recent US-Iran conflict.
However, reserve levels are approaching thresholds that some analysts believe could begin to affect operational flexibility. Estimates suggest inventories may need to remain above roughly 200 million barrels to maintain sufficient pressure within storage infrastructure and associated pipeline systems. Lower reserve levels also leave the US more vulnerable to future supply disruptions.
PJM faces pressure for reform
PJM Interconnection LLC, the largest US power grid operator, faces growing pressure to reform its governance and market structures. According to the chairman of the Federal Energy Regulatory Commission (FERC), the grid operator could face regulatory intervention if it does not implement reforms by the end of September.
Speaking at a conference on 23 July, the chairman said that “market participants have lost confidence in PJM’s decision-making abilities”. PJM has struggled to attract sufficient new generation capacity, resulting in a 6.8 GW shortfall in its most recent capacity auction.
Potential reforms under discussion include increasing the role of states within PJM’s governance framework, enhancing board independence and introducing regulatory changes through FERC. PJM has also proposed a backstop capacity auction and restrictions on large new load connections that do not provide their own generation during emergency demand conditions.
