Good morning!
Happy Friday! Crude oil prices held steady to start the week, supported by geopolitical headlines even as oversupply concerns grow louder. Washington remains locked in a government shutdown, and that uncertainty has weighed on markets broadly. However, all geopolitical and economic data released this week was bearish and pushed WTI below $60/barrel with a fairly firm ceiling.
President Trump is expected to meet with both Ukrainian President Zelensky and Russian President Putin in the coming weeks. Zelensky is reportedly asking for more advanced weapons like Tomahawk missiles, while Trump’s follow-up meeting with Putin in Budapest could prove critical for the ongoing ceasefire efforts. In the Middle East, minor flare-ups continue in Gaza, but the ceasefire remains largely intact. So far, it hasn’t been enough to push oil prices one way or another.
On the demand and supply side, the International Energy Agency (IEA) revised its global outlook sharply lower last week, citing a bigger-than-expected supply glut and weaker demand growth. Some agencies are now projecting an oversupply as high as 2.5% next year. The market consensus is that prices near or below $60 per barrel could eventually slow down U.S. shale activity, and the glut may persist through at least the first half of 2026. OPEC continues to face pressure as members are being audited on their so-called “paper barrels.” The group has trimmed its official demand forecast but still insists that by 2026, demand will once again outpace supply.
Trade developments added another twist. The U.S. has placed new sanctions on certain Chinese crude imports, creating a brief wave of buying as traders positioned ahead of potential disruptions. Meanwhile, in a surprise announcement, China continues to take in as much Canadian crude as possible through its new western export terminal. India is reportedly considering halting Russian crude imports, which could temporarily offer some support though global prices, though history suggests Russia always finds a buyer somewhere.
Domestically, the latest EIA data showed a build in U.S. crude inventories, reinforcing the near-term oversupply narrative. Futures markets have now flipped into contango across the five-year curve—meaning future prices are higher than today’s. That structure encourages storage and near-term buying as traders look to lock in cheaper barrels now in hopes of stronger prices later. The EIA did release a large draw in distillate inventories reporting that harvest east of the Rockies is in full demand season.
All in all, the market remains caught between potential geopolitical support and fundamental weakness. The wars may keep a floor under prices for now, but with international inventories rising and demand projections slipping, the near-term direction still looks soft for crude oil prices unless something major shifts in the headlines.
Chicago spot prices rocketed higher to end the week after the region’s largest refinery experienced an emergency shutdown. Products were already tight in the neighboring Group market from harvest, and the outage immediately sent gasoline prices up roughly 20 cents per gallon. Diesel prices also moved higher, helped along by strong seasonal demand from harvest. Given these conditions, retail pump prices are likely to move higher in the short term.
Propane prices held narrow as usual even as crop-drying demand picked up across areas east of the Rockies. The latest EIA report showed a surprise build in propane inventories, but with colder weather approaching, demand should pick up quickly. While the market still leans slightly bearish for now, any sustained crop drying along with a cold snap could spark a sharp, bullish move higher in prices.
As always, if you have any questions, comments, or concerns, please feel free to give us a call. Thanks and have a great weekend!
Best regards,
Jon Crawford