Topic 4: CRUDE OIL: VAPOROUS BARREL

In July 2025, crude oil prices displayed a mildly downward trajectory with intermittent volatility, driven by a complex mix of geopolitical developments, production-related decisions, and evolving global demand signals. By the end of the month, Brent crude had settled around $69.68 per barrel, West Texas Intermediate (WTI) hovered near $66.71, and India’s crude oil basket was priced approximately at $74.82 per barrel. These levels reflected both market caution and a rebalancing of supply-demand expectations as new geopolitical and economic factors emerged. One of the key influences on oil price movement during the month was geopolitical tension, particularly concerning Russia and the Middle East. Early in July, US President Trump issued a 50-day ultimatum to Russia regarding the Ukraine conflict. Ongoing instability in the Middle East—especially due to escalating Iran-Israel hostilities—and renewed threats of US secondary sanctions on buyers of Russian oil continued to support a cautious risk premium in prices. These unresolved tensions sustained an undercurrent of supply concerns, keeping market participants wary of potential disruptions despite the absence of major supply shocks during the month. On the production side, the OPEC+ group remained a central focus. In early July, the alliance of oil-producing nations announced plans to increase output by approximately 548,000 barrels per day starting in September. This decision was seen as an effort to meet expected future demand but also signalled the possibility of a supply surplus later in the year. As markets digested this upcoming production hike, it placed downward pressure on prices toward the end of the month, particularly as global economic signals appeared mixed. OPEC+ compliance levels and coordination between leading producers such as Saudi Arabia and Russia were closely watched by investors, influencing both sentiment and price expectations. Meanwhile, US crude oil inventories showed a notable drawdown in July, suggesting tighter short-term domestic supply and lending some fundamental support to global oil prices. However, robust US oil production and strong refining activity during the peak summer demand season helped balance the equation. Still, the overall sentiment leaned bearish as markets looked beyond the summer, factoring in forecasts from the International Energy Agency that pointed to a potential supply surplus later in 2025 as production outpaces consumption. Adding to the downward pressure was the impact of newly announced US tariffs, including those on imports from countries like India, set to take effect in August. These trade measures raised concerns about global economic growth, indirectly weighing on oil demand expectations. Investors feared that protectionist policies could dampen trade flows, reduce industrial activity, and ultimately lead to slower growth in oil consumption worldwide. To summarise, crude oil prices in July 2025 were shaped by a delicate balance of geopolitical risks, regional disruptions, planned production increases, and mixed signals from demand and inventory data. While supply fears provided intermittent support, the overarching narrative leaned toward price softening due to anticipated production expansion and growing concerns over global economic momentum.