Good morning!
Happy Friday! WTI crude oil prices didn’t move much this week, ending right where they started at about $63 per barrel. There was a lot of news—both from around the world and here in the U.S.—that pushed prices lower, but strong U.S. economic numbers helped keep them from falling further. The biggest headline was the Trump–Putin Alaska Summit, which kicked off today. Traders were watching closely for any signs of a peace deal in Ukraine. President Trump warned that if President Putin refused to end the war, the U.S. would hit Russia with “severe consequences,” including extra sanctions on countries that buy Russian oil. Most traders think these sanctions wouldn’t cut Russia’s sales much, since they believe Russia will find other buyers, so the market reaction was more on the bearish side.
China’s economy also showed signs of slowing down, which could mean less demand for oil. In July, industrial production (how much factories made) grew just 5.7% compared to last year—down from 6.8% in June and the slowest since November 2024. Retail sales (what consumers spent) grew only 3.7%, down from 4.8% in June, marking the weakest growth since December 2024. Investment in infrastructure and other long-term projects rose just 1.6% in the first seven months of the year, compared to 2.8% in the first half. The unemployment rate also crept up to 5.2% from 5.0%. All of this signals that China’s economy is losing steam—and that could mean less oil demand from the world’s second-biggest consumer.
Here in the U.S., the economic numbers told a different story—one that gave oil prices some support. On August 12, the government reported that inflation (measured by the Consumer Price Index, or CPI) rose 2.7% in July from a year ago, just under the 2.8% economists expected. But core CPI (which leaves out food and energy) came in higher at 3.1%, compared to the 3.0% forecast. A couple of days later, the Producer Price Index (PPI)—which measures inflation for businesses—jumped 0.9% in July from the month before, far higher than the 0.2% expected. That was the biggest monthly increase since June 2022, pushing the annual PPI up to 3.3% from what analysts thought would be 2.4%.
Meanwhile, the job market stayed strong, with weekly jobless claims falling to 224,000—better than expected and down from 227,000 the week before. Retail sales in July rose 0.5% from the previous month, exactly as predicted. Overall, this strong U.S. data makes it more likely the Federal Reserve will hold off on cutting interest rates in September, which helped keep oil from dropping further.
Another big story came from the International Energy Agency (IEA), which warned about a major oversupply of oil heading into late 2025 and 2026. The IEA expects oil inventories to grow by more than 2 million barrels per day on average in the last quarter of this year and the first quarter of next year. It also raised its forecast for global oil supply growth to 2.5 million barrels per day, while lowering its estimate for demand growth in 2025 to just 680,000 barrels per day. The slowdown is especially sharp in China, thanks in part to the rapid shift toward electric vehicles. In the U.S., gasoline use was down 1.5% from a year earlier. U.S. supply numbers backed up the IEA’s concerns. Crude oil inventories unexpectedly rose by 3 million barrels last week—when analysts had expected a drop—largely because of higher imports. Gasoline demand was down 1.5% over the past month, and diesel use fell by the same amount. With all this in mind, several analysts now expect oil prices to keep falling toward the $50–$60 range in the next few months. If the oversupply hits as forecast, WTI could dip below $60 in early 2026.
Here in the Chicago spot market, prices moved in step with crude oil and stayed steady. Supplies remain healthy. A fire at the Phillips 66 Wood River refinery temporarily halted gasoline production, but the shutdown should be short-lived. Even if it lasts longer, the end of summer driving season and strong inventories mean we’re unlikely to see big jumps in gasoline prices at the pump anytime soon. In addition, I do not expect to see diesel retail prices move much at the pump in the coming week.
Propane prices are still weak, with summer fill prices at their lowest of the year. Inventories rose by 3.9 million barrels this week, but total stocks are still behind last year’s levels. With corn yields looking strong—pointing to a potentially active corn-drying season—and if colder weather arrives earlier than expected, propane prices could rise faster than average going into end of year. Now is a good time to fill your tank or lock in part of your winter supply to protect against possible price swings.
As always, if you have questions, comments, or concerns, please feel free to give us a call. Thanks and have a great weekend!
Best regards,
Jon Crawford