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By: Harry Altham, Energy Analyst, Market Analysis EMEA & Asia
Oil markets have continued their choppy week, with a sharp focus on central bank policy decisions and DOE data addressed in the paragraphs below. Separately, China looks set to approve 97% of the requests to export oil products this year, which amounts to 75M bbl of clean fuels and 34M bbl of low sulphur fuel oil. This has come about after persistently weak demand data in the world’s second largest consumer; road and air traffic indices have fallen for two consecutive weeks due to new lockdowns in cities such as Shijiazhuang and Yining. The increased potential for exports has seen Shandong independent refinery utilisation rates increase by 2% w/w and gives rise to the notion of an ease in regional oil product inventory pressure after a difficult year following Russia’s invasion of Ukraine and OPEC+ production problems. Russia’s recent decision to mobilise 300,000 reservists drew widespread condemnation at the United Nations General Assembly yesterday, although we don’t see any moves by President Putin to offer himself an off-ramp from the crisis; the escalatory moves of this week have the potential to place markets in a state of turmoil, should the situation deteriorate.
The DOE inventory figures sent the clearest signal the market has yet seen that the post COVID demand boom is over in the West. If we consider global oil consumption to have peaked at 100.1M bbd in 2019 and floored at 88.7M bbd in 2020, the EIA’s estimate of global oil consumption in August at 99.5M bbd constitutes a 96% recovery versus pre-pandemic levels. Now though, as inflation dominates central bank policy decisions, that pace of recovery looks set to slow considerably, perhaps even make an about-turn. Gasoline and diesel products supplied fell to 8.3M bbd and 4.8M bbd respectively; both are at ten year seasonal lows and are part of a summer-long trend of suppressed demand, which is at least in part due to high fuel prices (average gasoline price in California is $5.24/gallon). Meanwhile, we saw a 3.9M bbl inventory build across oil, gasoline and diesel products across the United States (excluding SPR), which gives a further indication that much pressurised domestic oil inventories could be in for a rebuild over the winter months.
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WTI and Brent crude are moving to different beats as a possible U.S. Iran deal reshapes the oil market. The two benchmarks are pricing Strait of Hormuz risk in their own ways, and the gap between them says a lot about where crude goes next.
August 7 – The U.S. economy unexpectedly lost 23k jobs in July, dramatically below market expectations of an 80k increase and marking the worst Non-Farm Payrolls print since February. Furthermore, May and June were both revised sharply downward, with combined revisions showing 103k fewer jobs than previously reported. Outside of the healthcare sector, which added 22k jobs in July, the losses were very broad-based. Government payrolls saw the largest decline, shedding 53k jobs in July, the largest seen since October 2025, while June was revised down to show a loss of 10k jobs as well. The private sector at least saw growth, adding 30k jobs in July, now matching the month prior after it was revised down from the 49k initially reported, and substantially missing forecasts of 78k jobs being added. This is a sharp reversal in course from the largely better than expected U.S. labor data seen earlier this week.
The oil market keeps watching the Strait of Hormuz, but the tighter pressure on fuel is building in refining. With a large share of global capacity offline and unplanned outages carrying no repair timeline, diesel supply faces three fresh risks before winter.
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