Throughout August, persistent supply-side pressure prevented oil prices from achieving significant rebounds, with prices remaining volatile at relatively low levels. Although some ground was recovered in the latter half of the month, the overall recovery remained limited even amid heightened expectations for interest rate cuts and geopolitical tensions.
**Macroeconomic Environment**
Last week, President Trump signed documents announcing the dismissal of Federal Reserve Governor Cook. Subsequently, Cook's legal team stated this action lacked legal basis, and Cook would not resign while continuing to fulfill duties. Market sources indicated the Trump administration was evaluating ways to exert greater influence over the 12 regional Federal Reserve banks. Markets interpreted this as one of Trump's strategies to undermine the Federal Reserve, further fueling expectations for future rate cuts and easing pressure on the macroeconomic environment.
Data-wise, the US July PCE price index showed modest inflation increases, with core PCE inflation reaching 2.9% - the highest since February this year. While consumer spending grew 0.3%, an expanding trade deficit was dragging on third-quarter economic changes, focusing market attention on this week's non-farm payroll data. Previous data suggests no effective improvement in the quantity-over-quality issue in the US labor market, which may somewhat suppress market expectations for rate cuts.
On geopolitical fronts, Russia-Ukraine negotiations have gradually cooled recently, with market expectations for an agreement further diminishing. Trump stated Tuesday that if Putin doesn't agree to a ceasefire, he's prepared to impose greater economic sanctions on Russia and trigger "an economic war" with "very serious" consequences. However, markets don't hold high expectations for such scenarios materializing. Meanwhile, Russia launched its second-largest full-scale attack on Ukraine since the conflict began on Thursday, causing multiple casualties and further reducing market expectations for a Russia-Ukraine ceasefire, which has become a core factor supporting oil prices recently.
In the Middle East, Trump stated last Monday that the Gaza war would reach a "decisive conclusion" within two to three weeks, though this claim lacked effective evidence. Israel indicated it would not end the war unless Hamas in Gaza was completely destroyed, while Hamas refused to release remaining hostages unless Israel ended the war and withdrew troops. This suggests Middle Eastern geopolitical conflicts may continue, with ongoing volatility persisting.
Regarding Iran, negotiations with European countries have again reached an impasse. The UK, France, and Germany initiated a 30-day UN procedure Thursday aimed at reinstating sanctions on Iran. Iran quickly expressed regret and condemnation over the meeting's decision, suggesting Iranian crude export issues will persist and remain difficult to resolve in the short term.
**Fundamental Analysis**
On fundamentals, crude oil's commodity attributes have remained relatively stable recently, but markets have developed concerns about supply-side prospects from different angles. On one hand, markets were previously affected by news of potential US sanctions on Russia, expressing concerns about Russian oil export prospects and supporting oil prices. However, as the Russia-Ukraine conflict evolved further, Ukrainian attacks on Russian refining facilities have caused substantial impacts on Russia's energy industry chain. Attacks on nearly 10 refineries directly disrupted 1.1 million barrels per day of refining capacity, prompting Russia to further increase its crude export window, raising August western port crude export plans by 200,000 barrels per day compared to original plans. While the actual implementation of this increase remains uncertain, as Russia's domestic refining capacity declines, its export willingness will intensify, potentially keeping Russian oil exports at high levels going forward.
On the other hand, Iranian crude exports showed a declining trend in August, with daily average exports of approximately 1.5 million barrels, significantly down from the 1.7 million barrel daily average during March-May this year. This reflects multiple pressures under the backdrop of renewed US sanctions, and considering the country is still implementing OPEC+ compensatory production cuts, its future production recovery situation warrants continued attention.
**Inventory Situation**
For inventories, API crude oil inventories for the week ending August 22 recorded -0.974 million barrels (expected -1.725 million barrels, previous -2.417 million barrels). EIA crude oil inventories for the week ending August 23 recorded -2.392 million barrels (expected -1.863 million barrels, previous -6.014 million barrels). Current inventory data continues to show drawdowns, with magnitudes generally meeting market expectations. Although US crude production growth recorded its highest increase since March, the absolute quantity of the increase was relatively limited. Simultaneously, significant reductions in import quantities further contributed to inventory consumption. This situation may be difficult to effectively alleviate before short-term improvements in US diplomatic relations with Venezuela and Canada, with inventories potentially facing further declines.
For refined products, US gasoline inventories for the week ending August 23 recorded -1.236 million barrels (expected -2.154 million barrels, previous -2.72 million barrels). Distillate fuel inventories recorded -1.786 million barrels (expected +0.885 million barrels, previous +2.343 million barrels), marking the largest decline since the week of June 20, 2025. From a refined products perspective, seasonal consumption recovery provided the greatest assistance to refined product inventory drawdowns. Considering the approaching North American Labor Day holiday represents the traditional third-quarter travel peak season, recent refined product inventory drawdowns are due to seasonal factors. This situation may ease in the latter half of September, with relatively limited price impacts.
**Outlook and Perspectives**
Overall, oil prices' center of gravity clearly shifted lower throughout August, with supply-side pressure significantly outweighing market expectations for long-term macroeconomic recovery. This resulted in oil prices failing to achieve significant gains even when short-term reversals occurred in the latter period. Given current market conditions, supply-side changes in commodity attributes remain uncertain, but the gradual loosening under medium-to-long-term perspectives remains difficult to effectively alleviate, potentially continuing to pressure oil prices going forward. The arrival of North America's consumption peak season in the short term represents one of oil's supporting factors, limiting oil prices' downward space.
Regarding financial attributes, while market expectations for Federal Reserve rate cuts in September remain elevated, factors including rising panic data and warming US inflation data have prevented macroeconomic sentiment from turning completely optimistic. This week may still require observation of US labor market data and manufacturing performance.
On political attributes, recent developments in Russia-Ukraine conflicts, Middle Eastern Gaza conflicts, and Iranian nuclear negotiations all appear unfavorable, potentially maintaining geopolitical volatility and increasing oil price fluctuation ranges. Therefore, comprehensively speaking, oil prices will remain in a stage lacking clear upward momentum in the short term. While some upward space may exist, medium-to-long-term pressure persists.
**Author Profile:** Fan Lei is an analyst at Chang'an Futures with a master's degree and futures investment consulting certificate Z0021225. He possesses solid theoretical foundations and international perspectives. Since entering the futures industry, he has been dedicated to research and analysis work in macroeconomic and crude oil-related energy and chemical sectors, as well as options. He excels at fundamental analysis combined with policy-oriented theoretical frameworks for market judgment, consistently creating value for clients through professional knowledge and sincere attitudes.