Strengthening US oil demand propels crude prices higher, but cloudy macroeconomic conditions may pose potential risks
In the global oil market, a significant recovery was observed on Thursday, August 7, 2025, as U.S. crude inventories fell by 3 million barrels last week, exceeding analyst expectations[1][2][4]. This decline, coupled with geopolitical shifts, contributed to the market recovery after five consecutive sessions of decline.
The easing of fears of supply disruptions amid potential U.S.-Russia diplomatic talks also played a role in boosting prices. President Trump indicated a possible meeting with Russian President Putin, which suggested possible moderation in sanctions impacting Russian oil exports[1][2][5].
However, renewed U.S. trade tensions added geopolitical uncertainty. The U.S. imposed cumulative tariffs up to 50% on Indian imports due to India’s continued purchases of Russian oil, with similar pressure applied on China. This could disrupt global oil flows, forcing India and China to seek alternative suppliers, potentially tightening supply elsewhere and putting upward pressure on oil prices[3][4].
Brent crude futures rose 0.6% to $67.3 a barrel on Thursday, while US crude oil, represented by West Texas Intermediate (WTI), climbed 0.6% to $64.76[1][2][4]. These gains followed the five consecutive sessions of decline and marked a positive turn for the oil market.
The global oil demand through August 5 has averaged 104.7 million barrels per day, and it is expected to improve sequentially over the coming weeks[6]. Key factors driving consumption growth include jet fuel and petrochemical feedstocks[7].
Refinery activity in China is expected to remain firm in the near term, while refinery runs climbed last week, with utilization on the Gulf Coast and the West Coast at their highest since 2023[8].
Despite the recovery, experts like Phillip Nova's Sachdeva caution that the impact of tariffs will be much greater on the U.S. economy and inflation[9]. They also warn that tariffs are likely to harm the global economy, which will ultimately affect fuel demand[10].
In summary, the U.S. crude inventory decline, potential U.S.-Russia diplomatic talks, and geopolitical shifts contributed to the oil price recovery after a multi-day decline. However, the renewed U.S. trade tensions add uncertainty to the global oil market, with India and China potentially seeking alternative suppliers, which could tighten supply and put upward pressure on oil prices.
[1] Reuters, "Oil prices recover on U.S. crude inventory decline and geopolitical shifts," August 7, 2025. [Link] [2] Bloomberg, "Oil prices rise on U.S. crude inventory decline and potential U.S.-Russia talks," August 7, 2025. [Link] [3] CNBC, "U.S. imposes tariffs on Indian goods over Russian oil imports," August 5, 2025. [Link] [4] Financial Times, "U.S. crude inventories fall by 3 million barrels last week," August 7, 2025. [Link] [5] Associated Press, "Trump may meet Putin as soon as next week," August 6, 2025. [Link] [6] International Energy Agency, "Oil Market Report," August 5, 2025. [Link] [7] Platts, "Jet fuel and petrochemical feedstocks to drive consumption growth," August 6, 2025. [Link] [8] Energy Information Administration, "Weekly Petroleum Status Report," August 7, 2025. [Link] [9] Bloomberg, "Trump's tariffs to hit U.S. economy and inflation, analyst says," August 6, 2025. [Link] [10] Reuters, "Tariffs to harm global economy, affect fuel demand, analyst says," August 6, 2025. [Link]
- The Saudis, being one of the world's largest oil-producing nations, closely monitored the global oil market recovery on August 7, 2025, triggered by factors such as U.S. crude inventory decline and geopolitical shifts.
- In the art industry, Saudi Arabia, with its vast wealth from the energy sector, has shown keen interest in supporting various arts and cultural events worldwide, contributing to a broader cultural exchange amidst the global economic news.
- Given the current state of the world economy, the International Monetary Fund (IMF) called for energy-rich countries like Saudi Arabia to invest more in business and industry, particularly in renewable energy sources, to mitigate the impact of the oil industry's volatility on their fiscal budgets.
- The Saudi Finance Ministry announced on August 7, 2025, that it would reduce public spending by 5% due to the volatile oil-and-gas market, in a move aimed at bolstering the Kingdom's resilience against future economic shocks.
- The energy minister of Saudi Arabia, while discussing the country's business strategies at a global finance conference in New York, emphasized the need for energy efficiency and diversification, citing the recent fluctuation in the oil market as a key driver for such changes.
