Rollercoaster Week for Oil Prices Ends With a Surprise

Oil – Fundamental Analysis

Oil prices started the week off higher but faltered as a result of continuing concerns over a glut in the near-term and the first refined product storage gains in several weeks but despite a draw in crude inventories. Another proposed Russia/Ukraine peace deal as well as, the new plan for US offshore oil & gas leases took prices down to a key technical Low by week’s end. WTI prices had their weekly high of $60.95/bl. on Tuesday but fell to a low of $57.90 by Friday having dropped below the critical $60.00/bl. mark. December 2025 NYMEX futures expired Thursday and January 2026 became the “prompt” month on Friday. Brent followed a similar pattern, hitting its high of $65.10/bl. on Tuesday with its weekly low of $61.85 on Friday as well. Both grades settled lower vs. last week while the WTI/Brent spread has widened to ($4.50).

 Most of the oil market sentiment these days is clearly centered around an oversupply scenario lasting well into next year. The IEA has forecasted a daily surplus of up to 4.0 million bld. in 2026 largely due to increased production from non-OPEC countries.

 A new Russia/Ukraine peace plan was announced Thursday, and the US is encouraging Ukrainian President Zelensky to sign the agreement forged with Moscow. Unfortunately, it contains similar Ukrainian concessions as those of previous proposals Zelensky has stated he will not agree with. The recognition of Russia’s claim to the Crimean Region which they took by force, the ceding of territories occupied by Russian forces and disallowing Ukraine’s membership in NATO are all in this version. Savvy market watchers will give this agreement similar odds of success as those of the past. The latest sanctions on Russian crude are starting to show an impact as the price of Urals in the Black Sea has dropped to $36/bl., the lowest in (3) years.

The announcement by the current Administration to open-up the federal waters off the coasts of California, Florida and Alaska was immediately taken as more bearish news for oil supply. However, this is definitely a premature reaction as any development would be far down the road and would have to result in a change from the current capital discipline policies of most US E&P companies. We may see lease buying but not a clear timeframe for the actual investment. Drilling off of Florida’s West Coast is very controversial due to the state’s reliance on tourism.

 The Energy Information Administration’s Weekly Petroleum Status Report indicated that commercial crude oil inventories for last week decreased by -3.4 million bl. to a total of 424 bl. million and -5% below the 5-year average. The API forecasted a +4.4 million bl. gain while market analysts forecasted a +400k increase. US refinery utilization increased to 90.0% from 89.4%, representing a change in inputs of +260k to 16.2 million bpd. Gasoline demand was +20k bld. to 8.8 million bld. Total motor gasoline stocks increased +2.3 million bl. to 205 million bl. and are now -3% below the 5-year average and at the lowest level in (12) years. Distillates increased +170k bl. to 111 million Bbl. and are now at -7% below the 5-year average. Inventory at the key Cushing, OK hub changed -700k million Bbl. to 21.8 million Bbl. or 29% of capacity. The SPR was +535k bbl. to 411 million bbl. Imports of crude oil were +730 bpd. to 5.9 million Bbld. vs. 5.2 the prior week while exports were 4.1 million bpd. vs. 2.8 the prior week. Exports of petroleum products were 7.0 million bpd. last week vs. 7.2 the prior week. Total US oil production was steady at 13.8 million bld. vs. 13.2 last year at this time. Total US active rigs rose +5 last week to 554 vs. 583 last year with +2 in oil, +2 in gas and +1 “misc.”.

 AAA’s average US retail gasoline prices at the pump were most recently reported at $3.094/gal., +$0.014/gal. vs. last week, +$0.054/gal. from last month and -$0.031/gal. less than a year ago.

 Despite a strong earnings report by chipmaker, Nvidia, US stock markets fell this week on a rise in unemployment and a report indicating the US economy lost more jobs again in August. But a delayed BLS report for September indicated job growth of +119k, above expectations. However, unemployment rose from 4.3% to 4.4%. US wholesale inventories were flat in August vs. forecasts for a fall of (0.2%). The Dow is up on the week while the S&P and NASDAQ are lower. The USD is higher which is bearish for crude prices.