Oil struggles into September with oversupply risks rising
The WTI prompt-month contract closed down $0.59 to settle at $64.01/Bbl suffering its first monthly loss since April, as the market continues to grapple with the prospect of oversupply in the months ahead. US inventory draws and strong exports provided some support this week, yet broader concerns about sluggish demand and a looming glut continue to dictate sentiment. Against this backdrop, geopolitical tensions and shifting policy measures have added volatility but have not changed the underlying fundamentals.
The latest EIA data offered a glimpse of short-term support. Commercial crude stocks fell by a larger-than-expected figure of 2.4 MMBbls last week while exports surged nearly 300 MBbl/d to 3.77 MMBbl/d. In effect, the draw reflected strong export demand rather than a fundamental tightening of domestic supply.
At the same time, demand-side signals remain muted. The EIA highlighted that US transportation fuel consumption has yet to recover to pre-COVID levels, constrained by efficiency gains in vehicles and aircraft and by the growing role of biomass-based substitutes. Jet fuel demand growth, once a key driver in the post-pandemic period, is now slowing in 2025 and is expected to decelerate further into 2026. Retail gasoline markets reflect a same softer tone with pump prices averaging $3.15/gal ahead of Labor Day, 5% lower than last year, and the agency projects an additional 11% decline through December as crude weakens and refiners shift to lower-cost winter-grade gasoline.
Meanwhile, geopolitics continue to stir in the background. Ukraine intensified drone and missile strikes against Russian refineries this week, further disrupting product output. In parallel, Washington imposed a 50% levy on Indian imports to penalize New Delhi’s purchases of Russian crude, though Indian refiners have responded by stepping up US crude buying. These developments underscore the fluidity of global flows but, for now, have not meaningfully shifted the overall supply-demand balance.
This week’s developments reinforce the direction we outlined in last week’s market summary, when we formally shifted our crude outlook from neutral to bearish versus the forward curve. The EIA’s draws show that near-term balances can still tighten, particularly with strong exports and lower product stocks, but rising production, OPEC+ supply returns, and slowing demand growth point toward weaker conditions later this year. While geopolitics and product tightness may cushion immediate downside, the prevailing risks continue to tilt toward lower prices into 2026. AEGIS maintains a bearish market outlook.