Market Outlook

Oil prices declined again on Tuesday, continuing their downward oscillation. Clearly, without any news that could improve expectations, the market's mainstream approach to oil price expectations will maintain a cautiously bearish logic. Currently, the differences lie in the degree of oversupply in the future crude oil market and the downside space for oil prices. Early morning API weekly data showed that U.S. API crude oil inventories for the week ending August 15 fell by 2.417 million barrels, compared to an expected decline of 1.587 million barrels and a previous build of 1.519 million barrels. The data was slightly bullish, but oil prices showed little reaction after the release.

Trump outlined efforts to promote peace in Ukraine during a Tuesday interview, promising to provide some form of security guarantee for Ukraine, but not NATO membership. He believes Putin and Zelensky must make decisions, emphasizing he doesn't want to waste time and only wants to end the Russia-Ukraine conflict, giving Putin a few weeks. Trump said Putin might not want to reach a deal. He hopes Russian President Putin will behave well, otherwise the situation will be severe. However, Russian Foreign Minister Lavrov downplayed this vague commitment. Any meeting must be "step by step... starting from expert level, then going through all necessary steps," the Kremlin downplayed talk of an imminent summit between Russian President Putin and Ukrainian President Zelensky. Additionally, Budapest, Hungary could become the location for a meeting between Zelensky and Putin. But for Ukraine, Hungary would be an awkward choice, as it recalls the 1994 Budapest Memorandum. At that time, the U.S., UK, and Russia promised to respect Ukraine's independence, sovereignty, and borders in exchange for giving up nuclear weapons. But the 2014 attack proved the agreement meaningless, as no signatory provided military force to counter the attack.

Tuesday night trading saw domestic commodity markets generally retreat, with risk appetite cooling broadly. The petroleum sector maintained weak performance, with some divergence in high-frequency indicator changes. Crude oil monthly spread structure continued to weaken, showing continued cooling market expectations, while European diesel crack spreads rebounded again, creating some obstacles to oil price declines. Brent crude also showed relatively better resistance to decline, but it's expected to be difficult to prevent the overall weakening trend. SC crude oil recently performed weaker than international markets, continuing to hit new lows. Pay attention to timing and participate cautiously.

Daily Updates

[1] WTI main crude oil futures closed down $0.93, a decline of 1.48%, at $61.77/barrel; Brent main crude oil futures closed down $0.81, a decline of 1.22%, at $65.79/barrel; INE crude oil futures closed down 0.87%, at 480.9 yuan.

[2] U.S. Dollar Index rose 0.13% to 98.28; Hong Kong Exchange USD/CNY rose 0.06% to 7.1706; U.S. 10-year Treasury rose 0.18% to 111.75; Dow Jones Industrial Average rose 0.02% to 44,922.27.

Recent News

[1] U.S. President Trump: Arranging a meeting between Putin and Zelensky, Putin and Zelensky must make decisions, Putin and Zelensky get along better than expected. Hope Russian President Putin behaves well, otherwise the situation will be severe. Zelensky must also show flexibility.

U.S. President Trump: Ukraine will not become a NATO member, Ukraine should not have requested to join NATO. Putin happily answered the phone yesterday, (talking about relationship with Putin) there's a touch of warmth in our relationship. Don't want to waste time, I just want to end the Russia-Ukraine conflict. Putin might not want to reach a deal, we'll know Putin's intentions in the coming weeks. Will provide some form of security guarantee for Ukraine, but NATO membership is impossible. Calling for dialogue to begin soon, Ukraine will get a lot of land, Russia is a powerful military nation. France, Germany, Britain want to deploy ground troops in Ukraine, but the U.S. won't send ground troops, (talking about possible U.S. security guarantees) possibly through air support.

[2] Trump and Putin's Alaska meeting once raised concerns about Russian diesel returning to European markets, pressuring international diesel crack spreads downward. The summer gasoline peak season is about to end, the golden September diesel season is coming, and the Chinese market is transitioning to a diesel-strong, gasoline-weak mode.

Last week, Northwest European diesel crack spreads fell nearly $2.5/barrel. Recently, large volumes of U.S. and Middle Eastern cargoes arrived at ports, leading to some inventory accumulation. Latest data shows that for the week ending August 13, ARA diesel inventories rose 5.6% week-on-week to 1.86 million tons, but still down 18% year-on-year. During the same period, Singapore Bay diesel crack spreads fell nearly $3/barrel, with middle distillate inventories at 9.33 million barrels, up 7.5% week-on-week, hitting a five-week high.

Supported by summer travel peak season, international gasoline prices remained relatively firm. Last week, Singapore gasoline crack spreads rose over $1/barrel. But inventories began accumulating, pressuring future prospects. Latest data shows Singapore light distillate inventories rose 9.5% week-on-week to 14.24 million barrels, hitting a four-month high. On August 11, India's Nayara Energy shipped 35,000 tons of gasoline from Vadinar port, destined for the Middle East Gulf. This was the refinery's second gasoline export since the EU intensified sanctions on Russia in July. The refinery is 49% owned by Russian oil companies.

Last week, U.S. Gulf gasoline crack spreads rose more significantly, by $1.6/barrel. U.S. Energy Information Administration data shows that for the week ending August 8, U.S. refinery utilization was 96.4%, down 0.5 percentage points from the previous week's 6-year high, but 4.9 percentage points higher than the same period last year. The U.S. gasoline market will gradually switch to winter specifications, with prices likely showing a downward trend. Starting August 22, Mexican gasoline will switch from summer specifications with Reid vapor pressure of 9 to winter specifications with Reid vapor pressure of 11.5. Currently, the latter is priced 3 cents/gallon lower than the former.

The Chinese market will transition to a diesel-strong, gasoline-weak pattern. New energy vehicle substitution is accelerating, gasoline demand growth during this year's summer vacation still fell short of expectations. With the end of travel peaks, future demand looks bearish, and trading enthusiasm for restocking is declining. But with golden September approaching, diesel demand looks bullish, combined with concerns about supply tightening due to the implementation of the "Refined Oil Circulation Management Measures," recent trading restocking demand has surged. As of August 15, Bohai Bay gasoline cargo transactions were 80,000 barrels/day, down 44% from July average and down 30% year-on-year; in comparison, diesel cargo transactions were 160,000 barrels/day, up 14% from July average and up 81% year-on-year. Boosted by restocking demand, diesel prices remained firmer than gasoline. Argus data shows that on August 15, Bohai Bay diesel crack spread was $22.8/barrel, down $0.5/barrel week-on-week; gasoline crack spread was $15.4/barrel, down $1/barrel week-on-week.

On August 15, China-to-Singapore diesel export profit was -$9.6/barrel, down $3/barrel week-on-week; gasoline export profit was -$7.8/barrel, up $2/barrel week-on-week. September major company export plans may lean toward gasoline. It's also reported that the third batch of export quotas may be issued within the month, mainly general trade quotas. Latest customs data shows July diesel exports were 200,000 barrels/day, up 140% month-on-month and up 52% year-on-year; gasoline exports were 254,000 barrels/day, up 15% month-on-month and up 18% year-on-year; jet fuel exports were 500,000 barrels/day, up 8% month-on-month and up 12% year-on-year.

[3] Rystad Energy's August 2025 Oil Macro Monthly Report indicates that Brent crude oil prices are expected to fall to $65/barrel in Q4 2025, as OPEC+ accelerates the removal of production cuts leading to increased supply, combined with seasonal demand slowdown, pushing the market into surplus. Global liquid fuel balance for 2025 expanded from a previous surplus of 108,000 barrels/day to 235,000 barrels/day surplus, while crude oil balance shifted from a deficit of 290,000 barrels/day to a surplus of 157,000 barrels/day. On the demand side, global oil demand in 2025 is expected to reach 104.7 million barrels/day, up 807,000 barrels/day year-on-year, driven by the Middle East, China, India, and jet fuel, naphtha, liquefied petroleum gas (LPG); supply growth of 2.89 million barrels/day, mainly from OPEC+ (1.42 million barrels/day) and South America. Additionally, geopolitical risks (Russia-Ukraine conflict, sanctions), U.S. tariff policies, and seasonal refinery maintenance are key factors affecting the market.