The substantive announcement heralded in Sunday’s press on new steps against Russia, that harried oil prices onto monthly highs, turned out in fact to have a substantive fifty-day compliance option. Those that had taken earlier evasive action had to then turn themselves around because all this smells of is another move by the US President in granting out of the money date options to generate time premium. So much for ending the Ukraine war in his first twenty-four hours in office, Mr Trump’s capital as negotiator-in-chief is all but spent when gaming against the chess master that is Vladimir Putin and so are his threats for sanctions on Russia and secondary tariffs on its oil customers. There probably has never been a US President more attuned to oil prices than the current, and one that is all too aware that depriving the global oil puzzle of Russian exports at this present time would be the final accelerative to a building seasonal rally which would no doubt push the Brent price to $80/barrel. As discussed below, the low state of inventory can not tolerate ballooning crude prices, the price at the pump by US Gasoline customers before the end of the third quarter would be intolerable not just for the risk to inflation, but to the Administration’s political approval. Therefore, the fifty-day stay of hand is no accident, it is a cynical move in which if a decision on sanctions is made, and it is very doubtful there will be one, the calendar will be registering September and maybe an easier time for oil prices to countenance a theatrical Washington/Moscow face-off.

Inventory is key

The short-term warnings of tightness keep finding allying data with the latest indicator coming from Vortexa data repeated via Bloomberg. The amount of Crude held around the world on seven-day-stationary, floating tankers has fallen by 4.6% in the last week. The only trading hub to build inventory was APAC. The Middle East, Europe, West Arica, North Sea and US Gulf Coast all drew down stock and markedly the levels in North Sea fell by 81% to 700kb and in the US Gulf Coast by 75% to 253kb which are the lowest since October 2024 and March 2025 respectively.

Friday’s announcement by Exxon that the US Mars crude grade had suffered contamination due to zinc entering the pipeline following the start up of a new well, sharply brings into mind the lack of sour crudes available in the US. The flow of Mars is essential to fuel production in the important Gulf Coast refining hub. Indeed, Exxon, in a move to avoid having to shutter any part of the 520kbpd or so capacity at its Baton Rouge plant, requested aid from the US government which was duly obliged by the DOE releasing barrels from the strategic petroleum reserve. In an exchange for future replacement, and or it seems until an alternative source is found, the DOE pledged up to 1mb to maintain refinery operations. Most White House Administrations have historically been sympathetic to such causes and this one in particular must be more than aware of the need for stable regional supply of transportation fuels. Mars has been commanding very decent premiums at present, and without intervention, the pressure on supply would not only cause its price to travel sharply higher, but also its derivative products of Gasoline and Heating Oil. President Trump screams from every balcony of the White House on how the Federal Reserve should cut interest rates, the central bank will hardly be complaisant if motor fuels suddenly took to the skies and dragged inflation with them.

Prices in Gasoline are starting to represent how summer users are at last turning up and have aided seasonal influence as numbers start to form convoy with the much-covered state of distillate prices and low inventory. With the Mars news, US inventories will form quite a large following with the low state of levels at Cushing, Oklahoma regaining significance in consideration. Anything around 20mb has often been labelled as ‘bottoming’, but the state has existed for a while now. According to TankWatch, Geospatial Insights have that in tank there is 22mb as of Friday, 11th July, down 160kb from the week before. Interestingly, their review is higher than both the EIA and API, so the government and private data will be keenly watched for. Therefore, it is safe to assume as a short-term view, that further disruption to supply, be they from feedstock or products will be greeted with continued sensitivity. Yesterday saw a rhetorical reporting of a twelve-hour cut in supply in the CPC pipeline due to planned maintenance, but the headline was enough to give Brent prices a shove forward even as superficial as it was.

Even the International Energy Agency is getting in on the short-term bullish act. Never one from shying away from a bearish lean, the IEA does recognise the current predicament of the market. Sticking to its overall script on falling demand, even over calendar 2025 which it says will see the lowest growth rate since 2009 barring the pandemic year of 2020, it foresees higher summer demand that will lead to a tightened period. It noted on how the recent hike in output by OPEC+ enjoyed little impact and pointed to strong refining margins and a sharp backwardation. High margin and backwardation can only be served by low inventory, which is why for the moment and stealing from the affirmation in vote lexicon of the British Parliament, “the ayes bulls have it.”

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