Good morning!
Happy Friday! Crude oil markets traded within a narrow range during the week of July 21 to 25. WTI crude finished the week down 3%, settling at around $66 per barrel. While prices looked relatively steady, significant intraday volatility exposed deeper tensions building across both physical inventories and news headlines.
The biggest downward move came on July 22, when news broke that U.S.–EU trade negotiations had broken down. Fears of a potential 30% tariff resurfaced, rattling markets and sending WTI sharply lower. By the end of the week, sentiment rebounded somewhat as reports emerged of a tentative 15% baseline tariff agreement, alongside news of a landmark U.S.–Japan trade accord. These developments helped ease investor nerves and lent some support to crude prices. Still, the market stayed highly sensitive to trade headlines, and it’s clear policy risk continues to set the tone for oil price movement in the near term.
International dynamics added even more complexity this week. In Europe, sanctions policy took center stage. The EU passed another sanction package on Russian crude oil and refined products. Although the sanctions were designed to put pressure on Russian revenues, these measures had an immediate impact driving up the cost of diesel in Europe. In addition to European sanctions, OPEC+ restored 400k barrels per day of crude in July and signaled plans to add 550k barrels per day in August. Those volumes, however, were largely absorbed by an imbalance in diesel inventory. At the same time, the IEA revised its 2025 forecast for Chinese oil demand growth sharply downward, cutting expectations to just 80k barrels per day. That downgrade reinforced a growing sense that Asia’s largest consumer is nearing a plateau in oil consumption.
U.S. market fundamentals were tighter. Commercial crude inventories fell by 3.2M barrels, pushing stocks 9% below the five-year seasonal average. And U.S. total liquids output reached a record 20.8M barrels per day. And drilling activity held steady, with only a minor decline in active rigs. Demand trends painted a mixed picture. U.S. gasoline consumption was soft, averaging 9.5M barrels per day, down over 700k barrels from the same period last year. On the diesel side, things looked very different. While weekly implied demand appeared modest, monthly data showed that April usage ran nearly 5% above weekly estimates suggesting underlying freight and industrial demand remained solid. Inventories rose by 2.9M barrels, but still sat 19% below seasonal norms, which helped keep ULSD futures strong and widened the premium over gasoline.
In short, the crude market this week was more about refined-product tightness and geopolitical noise than about physical crude balances. WTI closed modestly lower, but the diesel market saw continued tightening. Looking ahead, the market will be watching closely to see if OPEC+’s planned August supply increase can help offset diesel shortages, whether EU sanctions enforcement holds up, and if U.S. gasoline demand finds some legs. Until we see a sharp downturn in global demand, diesel strength should continue to offer support for crude prices in the near term.
In local markets, gasoline and diesel prices continued to fall in the Chicago Spot market as refinery crack spread prices collapsed. I believe we have peaked in price for the summer season as long as crude oil prices remain steady. However, on Friday, the prompt spot month for Chicago changed to the September contract causing some basis support. Therefore, I don’t expect to see much movement of retail prices on both gasoline and diesel in the coming days.
Propane inventories experienced a surprise draw this past week. The announcement put an immediate floor on spot propane prices. Summer fill prices are at the lowest price of the year and the same as last summer. I highly recommend topping off your propane tank and locking in some gallons for the upcoming winter.
As always, if you have any questions, comments, or concerns, please feel free to give us a call!
Best regards,
Jon Crawford