Week In Review: Crude Oil Prices and US Inventory Rise and Russia-Ukraine Tensions Persist

Crude oil markets are trending higher this week, with WTI futures rising by over $1 per barrel on Friday morning and expected to close up week over week. U.S. market fundamentals played a central role in shaping sentiment, with the latest EIA Short-Term Energy Outlook (STEO) showing crude production averaging 13.4 Mbpd in 2025 before easing slightly to 13.3 Mbpd in 2026. The expected dip reflects softer drilling incentives as prices ease and drilling shifts toward gas-rich regions. Growth is expected mainly from the Lower 48 states, with Gulf of Mexico production remaining stable and Alaska experiencing slight decreases.

On the demand side, U.S. liquid fuels consumption is projected to increase by about 0.3 Mbpd in 2025, led by gasoline and distillate fuel. Distillate demand alone is expected to rise by 0.19 Mbpd, though inventories remain seasonally tight. Forecasts put distillate stocks at roughly 124-123 million barrels across 2025-2026, below the five-year average in many months. This leaves diesel markets exposed to volatility, especially as refinery maintenance begins to pull utilization rates below the current 95% level. Inventories saw strong builds this week, with crude up 3.9 million barrels, gasoline higher by 1.5 million, and distillates climbing 4.7 million. Whether these inventory builds will prove sufficient heading into winter remains uncertain, as planned refinery downtime could strain already limited diesel supplies.

Globally, geopolitical developments added another layer of volatility. A Ukrainian drone strike hit Primorsk, Russia's main oil-loading terminal on the Baltic coast, sparking renewed supply concerns. Tensions escalated further when Poland rejected President Trump's assertion that a Russian airspace incursion was accidental and subsequently requested additional air defense and counter-drone systems from allies. At the same time, the EU reiterated its commitment to phase out Russian oil and gas imports by 2028, while Japan aligned with Europe by lowering its price cap on Russian crude to $47.60/bbl. India also tightened enforcement measures, with its largest private port operator banning sanctioned ships, a move that could disrupt Russian crude flows into the country.

Prices in Review

Crude prices opened the week at $62.00 on Monday and moved higher through midweek, reaching $62.43 on Tuesday and $62.74 on Wednesday. The strongest gain came Thursday, when prices climbed to the weekly high of $63.80, before easing back to $62.27 on Friday.

Diesel prices opened at $2.2965 on Monday and trended higher through midweek, reaching $2.3185 on Tuesday, $2.3247 on Wednesday, and peaking at $2.3367 on Thursday. By Friday, prices eased back to $2.2808. For the week, diesel posted an overall decline of $0.0157, or 0.68%.

Gasoline prices opened at $1.9680 on Monday and dipped slightly to $1.9626 on Tuesday before increasing midweek, climbing to $1.9930 on Wednesday and reaching the weekly high of $2.0096 on Thursday. Prices then slipped back to $1.9734 on Friday. Overall, gasoline ended the week up just $0.0054, or 0.27%.