A rise driven by geopolitical risks and falling stocks Global
oil markets are witnessing a remarkable turnaround this week, as prices are heading for their first weekly gain in three weeks, supported by multiple factors, most notably increasing geopolitical risks and a larger-than-expected decline in US inventories.
Price movement:
Brent crude rose today by 0.3% to USD 67.85 per barrel, while WTI crude rose by 0.35% to USD 63.74 per barrel.
This rise comes after two weeks of decline, with Brent gaining 2.7% and WTI gaining 1.1% on a weekly basis until this morning.
Geopolitical factor: fading prospects for peace and its consequences
Hopes for a quick peace between Russia and Ukraine have been one of the factors that have put pressure on prices over the past two weeks, especially with possible US mediation efforts, but these hopes are beginning to fade.
So what's the reason for that:
- Continued military operations: Russia launched its largest drone and missile attack on Ukraine in more than a month.
- Recriminations: Russia accused Kiev of rejecting the prospect of a fair settlement, while Ukraine announced its hit to a Russian oil refinery.
- Difficult conditions: Russian President Vladimir Putin demanded that Ukraine give up the entire Donbass region and abandon ambitions to join NATO.
- Russia insists on the need to be part of any security guarantees for Ukraine.
Thus, the less likely a ceasefire is, the more likely it is that tougher US sanctions will be imposed on Russia, which increases the risk premium in oil prices.
Key supporting factors: demand and inventories
Along with geopolitical factors, prices received support from:
1-decline in US inventories: data from the Energy Information Administration showed a decrease in crude inventories by 6 million barrels last week, while a decrease of only 1.8 million barrels was expected.
2-Strong demand: especially with the rise in jet fuel consumption to the highest level since 2019, indicating strong demand during the summer travel season.
The United States has also stepped up pressure on India over its purchases of Russian oil, announcing the imposition of 25% tariffs on Indian goods from August 27.
Russian oil accounts for about 35% of India's total oil imports.
This decision could reshape global energy trade flows and support prices globally.
Anticipation of a central event: Powell's speech in Jackson Hole
Traders around the world are waiting for Fed Chairman Jerome Powell's speech at the Jackson Hole economic seminar today, looking for signals about US monetary policy and the prospects for lowering interest rates.
The impact on economic growth and oil demand.
Future forecasts: between optimism and caution
- Short-term uptrend: as tensions continue and stocks decline.
- Increased risks: especially with uncertainty about peace talks and US monetary policy.
- Supply challenges: current data defy the oversupply forecasts projected by the International Energy Agency and the US Energy Information Administration for 2026.
