Oil market prices caught between sanctions and surpluses

Oil’s on a bit of a tightrope right now. On one side, you’ve got political tension ratcheting up - with threats of fresh sanctions and tariffs that could squeeze global supply. On the other hand, the market is staring at rising stockpiles and sluggish demand forecasts that suggest prices should be heading lower. 

Add in a few sharp comments from Trump, a looming OPEC+ meeting, and some eyebrow-raising inventory data, and you’ve got a market that’s holding firm - but wobbling. Will geopolitics keep oil propped up, or are fundamentals about to pull the rug?

Fresh sanctions and tariff threats fuel geopolitical premium

The latest push higher came after former President Donald Trump issued a stark warning - Russia has 10 days to make progress on a ceasefire in Ukraine or face a fresh round of economic penalties. And this time, it’s not just sanctions on Moscow. Trump floated the idea of 100% tariffs on countries still buying Russian oil, which sent a shiver through the market.

The impact? Immediate. Oil surged nearly 4% in a single session, with Brent moving above $72 and WTI flirting with $69 - the highest levels in over a month. 

Alt Text: Candlestick chart showing a sharp upward movement in oil prices, with a breakout spike from below $67.00 to above $69.50, followed by slight retracement.

Source: Trading View

According to analysts, traders weren’t just reacting to headlines; they were pricing in the very real possibility that over 2 million barrels a day of Russian supply could suddenly go off-grid if big importers like India change course (China, not so much- Beijing’s likely to dig in).

Crude inventories rise as demand growth slows

While the geopolitical backdrop is sizzling, the fundamentals are still whispering, “easy now.” U.S. crude inventories unexpectedly climbed last week - up 1.539 million barrels according to the API - which isn’t what you want to see in a supposedly tight market. 

Alt Text: Bar chart showing weekly changes in U.S. crude oil inventories per million barrels from August 2024 to July 25, 2025. 

Source: American Petroleum Institute (API), TE

Demand, meanwhile, isn’t setting the world alight. The International Energy Agency has trimmed its 2025 demand growth outlook to just 700,000 barrels per day - the slowest since 2009.

And it’s not just demand that’s dragging its feet. Supply is quietly on the rise, too. OPEC+ is still pumping, the U.S. is more than ready to ramp up production (Trump practically dared the market to test them), and Venezuela is waiting in the wings, hoping for the green light to restart sanctioned operations.

So despite the fiery rhetoric and rising prices, the basic supply-demand balance is looking… well, a bit too well-fed.

Technical breakout or false rally? 

This is where it gets even more interesting. The price rally wasn’t just about headlines - it also tripped a few wires in the technicals. WTI broke above its 200-day moving average, triggering a wave of technical buying. Bullish options are now outpacing bearish ones for the first time in weeks, and commodity trading advisers have flipped from net short to net long. Momentum, for now, is pointing up.

But here’s the catch - much of this movement is being driven by what might happen, not what’s already happened. If that 10-day deadline passes without sanctions, or if global buyers call Trump’s bluff, prices could unwind just as fast.

Key events that could move oil market next

There’s no shortage of market-moving events in the pipeline. We’ve got:

• The U.S. Federal Reserve’s rate decision (will they hint at cuts or stay hawkish?)
  
  
• Fresh inventory data from the EIA
  
  
• The 1 August trade deadline between the U.S. and its major partners
  
  
• And, of course, the OPEC+ meeting, which will determine how much oil is heading into the market in September
  
  

Oh, and let’s not forget broader macro data: China’s PMI, U.S. nonfarm payrolls, and even the Bank of Japan’s policy update could all swing sentiment on global energy demand.

Oil prices are holding steady for now, but they’re standing on shaky ground according to analysts. The geopolitical risk premium is keeping prices afloat - but if diplomacy takes the heat out of the headlines, the market may start focusing on the basics again. And the basics are… well, not particularly bullish.

So, will oil stay up or dip? According to analysts, it depends on whether the market keeps trading on what’s happening in the real world, or what might be coming out of Washington next week.

At the time of writing, prices are in price discovery mode after a huge move down weeks ago. The bullish narrative is supported by the volume bars showing dominant buy pressure over the past 3 days. If the rally continues, we could see prices breach the $70 mark. Conversely, if prices succumb to fundamentals, we could see a price reversal. A significant plunge could see prices held at the $64.73 and $60.23 support levels.  

Alt Text: Daily candlestick chart of WTI Crude Oil showing a breakout above the $64.73 resistance level, now entering a “price discovery area” near $69.18. 

Source: Deriv X

‍