WTI Drops to Lowest Since June Ahead of US–Russia Summit
Crude oil prices extended their slide on Friday, with the WTI prompt-month contract settling $1.16 lower at $62.80/Bbl, the lowest close since June 2. The decline came ahead of a pivotal US–Russia summit in Anchorage, Alaska, where Presidents Donald Trump and Russian President Vladimir Putin are expected to discuss a potential ceasefire in Ukraine. An agreement could pave the way for easing US sanctions on Russian crude exports, adding barrels to an already oversupplied market.
OPEC+ is set to implement its final tranche of production hikes on September 1, adding another 548 MBbl/d as part of the group’s accelerated return of 2.2 MMBbl/d of curtailed output. At the same time, the demand outlook has weakened. China, the world’s largest crude importer, reported softer-than-expected July industrial production, retail sales, and fixed-asset investment. The slowdown adds to concerns that the global economy is losing momentum, further eroding demand growth expectations.
Against this backdrop, the EIA’s latest Short-Term Energy Outlook (STEO) reinforced the bearish tilt in market sentiment. The agency cut its WTI price forecast for 2025 by $1.64 to $63.58/Bbl and for 2026 by $7.05 to $47.77/Bbl, citing expectations for sizable OECD inventory builds. Commercial stocks are now projected to rise by more than 2 MMBbl/d in 4Q25 and 1 MMBbl/d in 1Q26, roughly 0.8 MMBbl/d higher than last month’s forecast. While the EIA expects weaker prices in early 2026 to prompt output cuts, those reductions are not anticipated until later in the year, slowing stock builds only in the second half of 2026.
In the near term, prices remain under pressure from the combination of rising supply, swelling inventories, and softening macroeconomic indicators. While production pullbacks in late 2026 could slow stock builds, the prevailing outlook points to a market dominated by excess supply and constrained demand, with geopolitical developments serving as the primary driver of short-term volatility. AEGIS maintains a neutral view with a bias to the downside.
Crude Oil Factors
Geopolitical Risk Premium. (Bullish, Mostly Priced In) President Trump will meet with Russian President Vladimir Putin in Alaska on August 15. US and Russian officials are working towards a deal that would lock in Russia’s occupation of territory seized during its military invasion. Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management, said, “We judge that tonight’s meeting is unlikely to deliver significant results.”
Speculator Positioning (Bearish, Priced In) Speculator's net-length in WTI futures fell, as of the latest CFTC data, with non-commercial traders holding a net-long position of 209k contracts. Positioning has risen steadily since April, when it fell to the lowest level seen in several years.
OPEC Market Share War. (Bearish, Surprise) OPEC raised crude production by 360,000 bpd in June, its largest increase in four months, as Saudi Arabia led a push to reclaim market share despite weakening demand and rising global supplies. The Saudis, along with the UAE and Kuwait, ramped up both production and exports, signaling a strategic shift away from price defense and toward volume gains.
Oil/Product Inventories. (Bullish, Priced In) Crude inventories in the US remain low, although stocks have risen this year in-line with seasonal trends. Crude data is usually on a several-month lag. According to the July IEA report, OECD inventories have started to move higher. Global inventories are expected to increase throughout the year. Diesel inventories rose, but they’re still at the lowest seasonal level since 1996. According to Goldman Sachs, diesel-refining margins are likely to stay above long-run averages.
OPEC+ Quotas. (Bullish, Priced In) On June 2, OPEC+ announced its extension of 3.66 MMBbl/d cuts through December 2025. Additionally, the 2.2 MMBbl/d voluntary cuts from eight member countries will continue into Q3 2024 but will start to be reversed in October at a rate of 0.18 MMBbl/d per month. OPEC+ members agreed on September 5 to delay a planned gradual 2.2 MMBbl/d supply hike by two months, shifting the start to December. The group will add 0.19 MMBbl/d in December and 0.21 MMBbl/d from January onwards, with an option to adjust or pause these hikes depending on market conditions. The cartel also reaffirmed its compensation cuts of 0.2 MMBbl/d per month through November 2025, as members such as Iraq, Russia, and Kazakhstan have struggled to meet their original production quotas.
AEGIS notes that the global crude market would quickly build inventories without OPEC's support in reducing supply.
OPEC Unwind. (Bearish, Mostly Priced in) OPEC+ announced a 547 MBbl/d production quota increase for the month of September, completing the reversal of the group’s November 2023 supply cuts a full year ahead of schedule. The move brings the total unwind to approximately 2.5 MMBbl/d, including the 300 MBbl/d hike allocated to the UAE.
China Demand. (Bearish, Priced In) China's oil demand has been severely affected by a combination of economic weakness and electrification trends within the country. Continued weakness in China's real estate sector has led to slower economic growth. The Chinese government has responded with interest rate cuts and multiple stimulus packages. Electrification trends have also dampened oil demand growth, with the buildout of high-speed rail and LNG-powered trucks and busses impacting diesel demand. China is one of the most prolific adopters of electric vehicles, impacting gasoline demand. Some estimates show demand for transportation fuels in China peaking, but oil demand from China's petrochemical sector should continue for the next few decades.
USD (Bullish, Priced In) The US dollar index surged to multi-year highs toward the end of 2024. The dollar has since erased all post-election gains despite tariff fears being realized. Typically, a stronger dollar will have a negative impact on crude prices, while a weakening dollar will support prices.
Ukraine-Russia Resolution. (Bearish, Surprise) Russia has intensified drone strikes in an effort to pressure Ukraine into accepting its terms for a resolution. Meanwhile, the European Union is proposing a new sanctions package, including a ban on the Nord Stream pipelines and a reduction of the oil price cap to $45/Bbl, to increase pressure on Moscow. While the prospect of a resolution is bearish for crude, additional sanctions could provide offsetting price support.
Trade War. (Bearish, Mostly Priced In) The EU and South Korea are both set to pay a 15% levy on imported good to the US, a similar deal to Japan. Brazil has been granted a seven day extension after the President said the major trading partner would pay a substantial 50% tariff rate. Trump said it would be difficult to reach a deal after Prime Minister Mark Carney anonunced that Canada would recognize the Palestinian state.
Projected Oversupply. (Bearish, Mostly Surprise) According to the EIA, global liquid fuels production will rise by 2.0 million b/d in 2H25 compared with 1H25, with OPEC+ and non-OPEC producers each accounting for about half of the increase. Gains from the United States, Brazil, Norway, Canada, and Guyana will match those from the producer group. Global demand is expected to climb by 1.6 million b/d over the same period, resulting in inventory builds accelerating by nearly 0.5 million b/d.
Trump/Iran/Venezuela. (Bullish, Surprise) The US government has let Chevron resume oil operations in Venezuela. Before losing their license to operate, the supermajor was producing 240 MBbl/d in Venezuela with most of the production going to refineries in the Gulf Coast.
Russian Supply. (Bullish, Surprise) Trump hes threatened secondary sanctions on any countries purchasing barrels from Russia if they do not reach a ceasefire deal with Ukraine in the coming days. He also expressed disapproval of India's large Russian crude purchases, stating that the country could face an unknown penalty for its actions.
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