Week in Review – Prices Soften as Markets Eye Potential Ceasefire and Rising Inventories

Oil prices eased Friday as markets braced for the outcome of a closely watched summit between U.S. President Donald Trump and Russian President Vladimir Putin in Alaska. The meeting, expected to focus on a potential ceasefire in Ukraine, has traders weighing the geopolitical implications for global oil supply. Brent crude fell over 50 cents to $66 per barrel on Friday, while West Texas Intermediate (WTI) slipped over 60 cents to $63. For the week, Brent is on track for a modest gain, while WTI is set to decline.

The possibility of a ceasefire carries market-moving consequences. An end to hostilities could pave the way for greater Russian oil production, easing some of the current supply constraints. Trump has indicated he believes Russia is prepared to end the war but has also warned that countries buying Russian oil could face secondary sanctions if peace efforts stall.

Economic data from China added pressure to the market, raising concerns about fuel demand from the world’s second-largest crude consumer. Government figures showed factory output growth falling to an eight-month low and retail sales slowing to their weakest pace since December. While refinery throughput in July was 8.9% higher year-on-year, it fell from June’s levels, which were the highest since September 2023. The increase in refinery activity coincided with a rise in oil product exports, suggesting weaker domestic fuel consumption.

Beyond geopolitical risks and demand concerns, forecasts of a growing global oil surplus are weighing on sentiment. Bank of America projects an average surplus of 890,000 barrels per day from mid-2025 to mid-2026, with supply growth driven largely by OPEC+ members. The International Energy Agency has similarly warned of a “bloated” market following recent production increases from the group.

The U.S. Energy Information Administration’s (EIA) August short-term energy outlook took a more bearish turn, cutting its Brent crude price forecasts for 2025 and 2026. The agency now expects Brent to average $67.22 per barrel in 2025 and $51.43 in 2026, down sharply from its July projections. The EIA cited accelerated OPEC+ production increases with scheduled cuts, which will be fully unwound by September 2025 instead of September 2026, and an anticipated jump in global inventories. It projects stock builds averaging 1.9 Mbpd in the second half of 2025, rising to 2.3 Mbpd in early 2026.

The latest EIA STEO chart shows U.S. commercial crude oil inventories rising sharply through late 2025 and early 2026, reflecting the forecasted supply surplus. As builds accelerate, stocks are projected to reach multi-year highs, reinforcing expectations for downward pressure on crude prices.

Historically, such sustained inventory growth has led to crude price declines of 25–50%. The EIA warns that storage constraints could drive prices below $50 per barrel in early 2026 before modestly jumping to $54 by year-end as producers cut back output. While forecasts vary—Standard Chartered projects $78 per barrel in 2026, while J.P. Morgan sees $58—the consensus points to a market under pressure from surging supply, fragile demand, and heightened geopolitical uncertainty.

Prices in Review

Crude prices opened the week at $63.48 and experienced modest fluctuations over the following days. Prices ticked higher on Tuesday to $64.00 before slipping to the weekly low of $62.79 on Thursday. A mild increase on Friday brought crude back to $63.91. Overall, prices gained $0.43 per barrel for the week, representing a 0.68% increase.

Diesel prices opened at $2.2678 on Monday and saw a slight uptick on Tuesday to $2.2912 before easing midweek. Prices dipped to $2.2443 on Wednesday and held relatively steady at $2.2458 on Thursday. By Friday, diesel opened at $2.2374, marking an overall weekly decrease of $0.0304 per gallon, or 1.34%.

Gasoline prices opened at $2.0696 on Monday and saw minimal movement early in the week, edging up to $2.0778 on Tuesday before dipping slightly to $2.0710 on Wednesday. Prices increased to $2.0770 on Thursday and climbed further on Friday to $2.1093. Overall, gasoline rose $0.0397 per gallon for the week, representing a 1.92% increase.