Collapse in petcoke prices restores the discount towards coal

The geopolitical situation between Iran and the USA-Israel continues to dominate the markets, with changing statements concerning a ceasefire agreement, new hostilities between Israel and Iran and sporadic fighting with Iran and the USA. 

The Strait of Hormuz (SoH) is still largely blocked despite many ships sailing without transponders and under some form of protection. At the time of writing, Iran has just declared it has stopped its attacks on Israel, prompting a fall in oil prices. The economic spill-over is being felt in the potential inflationary impact, while the European Central Bank has raised concerns and is preparing to increase interest rates. The Federal Reserve is seen as more hesitant under its new chairman, Kevin Warsh.

There are market fears of a possible demand crush due to a prolonged closure of the SoH. The VIX volatility index has risen from 17 to 19 but is still resilient. Surprisingly the euro has fallen two per cent to US$1.1550 but remains in the range of US$1.15-1.20. Brannvoll ApS forecasts a range of US$1.10-1.25 in 2026, with an average of US$1.19.

Oil
Volatility slowed during May-start June but is still fully driven by statements and military actions around the SoH, where the double blockade is keeping oil prices elevated. After three months the focus is turning towards reserves and what will happen if refineries start running low. This could lead to massive spikes above US$125 if no solution is found soon. The physical market is in a less steep backwardation with Dec 27 at US$75 compared to a front-month Aug price of US$95.  Brent oil is down five per cent MoM to US$95 and still in the US$90-$100 range. The TTF (Cal27) gas price is unchanged at EUR37, and EU gas storage has increased from 34 to 42 per cent but is lagging on previous years.

Brannvoll ApS forecasts a Brent trading range of US$55-125 and an increased average to US$75 for 2026, having added US$40 to the top due to the Middle East conflict.

Coal 
As the energy complex remained under pressure from higher oil prices, coal initiated a sharp rally in the Atlantic basin. Supply was reduced by lower Indonesian exports and the Colombian export blockade in May. In addition, a major Chinese mining accident led to an increase in safety controls,  and reduced domestic output at a time of  increased demand. Several European power producers have refilled coal stocks as they fear lower LNG supplies. Türkiye has remained a buyer of Russian-denominated coal, which is still offered with discount.

The API2 3Q26/front quarter (FQ) contract rose 15 per cent MoM to US$132, above in the expected range of US$105-125, while the Cal27 contract rose nine per cent to US$128. 

API4 3Q26/FQ contracts were up by five per cent to US$118, still in a short-term range between US$100-120. 

Brannvoll ApS predicts a API2 FQ contract range of US$85-130, averaging at US$100, and API4 in a range of US$80-125 in 2026.

Petcoke  
The petcoke market finally reached the peak expected for some time and a major decline took place as a result of higher USGC supply and the massive coal switch seen over the last months. Higher US refinery capacity utilisation at 93 per cent saw increased petcoke supply. This combined with a fall in demand due to an extremely low and even negative discount accelerated the fall in prices.  In addition, Venezuela is still expected to return to the market, which would lead to increased supply of medium-sulphur material. The prices fell sharply as traders and refiners had to sell petcoke to clear refinery stocks.

However, the drop in petcoke prices combined with the rally in coal has suddenly increased the discount back in favour of petcoke and Indian traders have quickly entered the market.  

Petcoke discount to coal – API2 USGC 6.5% USGC ARA based on 6000kcal: Jun 2026: 32%

The USGC FOB 6.5 per cent contract is down a considerable 25 per cent MoM to US$78.50, while the discount to API4 rose from 26 per cent to 47 per cent. The USGC ARA 6.5 per cent contract fell sharply by 18 per cent MoM to US$112 and the discount increased to 32 per cent. 

The USGC FOB 4.5 per cent contract collapsed 23 per cent MoM to US$87.50, with the FOB discount to API4 up to 41 per cent. The USGC ARA 4.5 per cent contract fell 15 per cent to US$121, reshaping the discount to 27 per cent, again giving petcoke an edge.

If geopolitics calm, prices are expected to remain in a 10 per cent range.
Brannvoll ApS maintains a range of US$85-105 (up to US$140) for the ARA 6.5 per cent contract in 2026, with an average of US$95 and a discount of 25 per cent.

by Frank O. Brannvoll, Brannvoll ApS, Denmark