Crude Oil Market Analysis: Sentiment Shifts as Inventories Build and Weather Risk Advances

The global crude oil market finds itself at a pivotal juncture as July 2025 begins, with both ICE Brent and NYMEX WTI futures exhibiting significant volatility. Prices struggled to recover from early-week losses triggered by elevated US inventories, robust Russian and US exports, and a persistent lack of supply discipline among OPEC+ members. While periodic rallies driven by geopolitical headlines and weather risk—particularly in the US Gulf—offered brief relief, the bearish undercurrent continues to dominate, as reflected by the backwardation seen in the forward curve. Speculative funds have trimmed their net-long positions, adding to the defensive environment. However, range-bound trading suggests traders are awaiting more definitive cues from OPEC+ policy and US demand trends.

Seasonal factors are now in sharp focus. The start of hurricane season in the Gulf of Mexico brings a moderate but rising risk of supply disruption, while hotter-than-normal weather in North America and the Middle East is driving up regional power demand, supporting refined product consumption. Inventory builds in the US and ever-stable output from Russia and Saudi Arabia keep global supply ample. Meanwhile, demand signals from China and India remain mixed, reflecting macroeconomic uncertainties and soft US and Asian manufacturing activity. Against this backdrop, traders should brace for ongoing volatility, with sentiment likely to swing on weekly data releases and geopolitical updates.

📈 Prices: Futures Snapshot on Key Exchanges

Contract	NYMEX WTI (USD/bl)	Change (Weekly)	ICE Brent (USD/bl)	Change (Weekly)	Market Sentiment
July 2025	60.79	-0.25%	62.78	-0.91%	Bearish
August 2025	59.79	-0.69%	62.05	-1.08%	Bearish
September 2025	59.49	-1.90%	62.05	-1.08%	Bearish
October 2025	59.02	-1.91%	62.25	-1.72%	Bearish
December 2025	60.64	+1.72%	64.03	+1.70%	Bullish (long-dated)

Recent contracts reflect a softening since June, with short-term sentiment dampened by high inventories and demand uncertainty.
See underlying strong backwardation and tightening beyond mid-2026.

🌍 Supply & Demand Drivers

• OPEC+ Production: Compliance remains patchy, with Russia’s exports near 4 mln bpd and Saudi quotas stable around 9 mln bpd. No new voluntary cuts have been announced.
• US Inventories: EIA data show US crude stocks have risen by +2.74 million barrels, reaching 10-month highs. This continues to pressure WTI and Brent.
• Speculative Positioning: Hedge funds have trimmed net-long exposures, with some managers turning net-short amid weakening price signals.
• Demand: China’s recovery remains lackluster (stable but unspectacular import growth), while US gasoline draws lag seasonal averages. India continues to show softer-than-expected demand.
• Geopolitical Risk: The Red Sea corridor rerouting, and Middle East tensions inflate risk premiums but no acute supply outages reported.

📊 Market Fundamentals

• Production:
  US: 13.2 mln bpd (record), Saudi: 9.0 mln bpd, Russia: 10.8 mln bpd, UAE: 4.0 mln bpd.
  Non-OPEC+ supply still climbing, especially from the US.
• Stocks: OECD inventories are above five-year averages; China strategic reserve build continues but less aggressively than in 2023. Russian inventories stable.
• Refining Margins: Pressured by slow demand growth in West, remain firm in Asia on summer demand.

Country	Latest Output (mln bpd)	Inventories	2025 Oil Exports (mln bpd)
USA	13.2	10-month high	3.5
Saudi Arabia	9.0	Stable/ample	7.4
Russia	10.8	Stable (~100 mln bbl)	5.3
UAE	4.0	Stable	2.7
China (Importer)	4.2	N/A	N/A

⛅ Weather Outlook & Impact

• US Gulf Coast: Above-average heat, supporting refined product runs. Hurricane risk is moderate in the 3-7 day window, requiring vigilance.
• Middle East: Ongoing drought and high temperatures persist, but major supply interruptions are not expected.
• Russia/Caspian: No acute weather-related disruption risk reported currently.

📆 Trading Outlook & Recommendations

• Short-term: Mildly bearish. Range-bound price action likely in the near-term (Brent: USD 62–64/bl, WTI: USD 59–61/bl).
• Physical buyers: Maintain cautious forward coverage, especially for Middle East or high-sulfur grades.
• Hedgers: Consider put options and protective strategies on downside risk. Upside rallies require a confirmed supply disruption.
• Monitor: Geopolitical updates, EIA/API inventory reports, OPEC+ output compliance, and hurricane forecasts.

⏳ 3-Day Regional Price Forecast

Exchange	Contract	3-Day Forecast (USD/bl)	Trend
ICE	Brent Aug 25	62.30 – 63.10	Stable / Range-bound
NYMEX	WTI Jul 25	60.25 – 61.05	Stable / Slight Downside

Key watchpoints: US inventory changes, OPEC+ policy, speculative flow, and Gulf weather risk. Volatility remains likely.