By Joe Hoppe
Here is a look at what happened in oil markets in the week of Aug. 18-22 and what the focus will be in the days to come.
OVERVIEW: The oil market is in a wait-and-see mode as a deadline for U.S. secondary tariffs on India loom and investors digest a likely September interest rate cut. Brent crude, the international oil benchmark, trades around $67.70 a barrel, while the U.S. oil gauge West Texas Intermediate is around $63.60 a barrel.
With summer coming to an end soon, market participants are growing increasingly worried about excess supply and an uncertain demand outlook. Oil has lost nearly 10% this year so far amid concerns over the impact of Trump’s tariffs and a faster-than-expected increase in OPEC+ output.
MACRO: Investors were surprised by a more-dovish-than-expected speech from Federal Reserve Chair Jerome Powell at the Jackson Hole summit in Wyoming on Friday, in which Powell the door open to interest rate cuts.
Powell’s speech emphasized somewhat greater downside risks around the labor market than expected, which could reduce concerns that costs increases due to tariffs will fuel inflation.
The market now appears to be fully pricing in a 25 basis point interest rate cut in September, causing the U.S. dollar to fall and stocks and risk assets to rise.
A Fed cut should be bullish for crude, supporting economic growth and oil demand. However, there may still be a more wait-and-see attitude to how negotiations with Russia over a ceasefire with Ukraine go, said Dennis Kissler of BOK Financial in a note.
GEOPOLITICAL RISKS: Trump and Putin’s summit in Alaska ended with little concrete in terms of a definitive peace in Ukraine, though Trump’s threats of “severe repercussions” in the event of a failure at the talks also failed to materialize.
Oil moved lower in the immediate aftermath of the summit and following Trump’s meetings with other European leaders earlier in the week, including Ukraine’s Volodymyr Zelensky. This reflected growing optimism in the market for some resolution to the war, and therefore an easing of sanctions on Russia.
However, later in the week, the geopolitical risk premium returned as hopes of a cease-fire faded, as a Putin-Zelensky summit is proving difficult to set up and discussions around potential security guarantees are facing obstacles. Russia, for example, is suggesting that it should be part of any security guarantees for Ukraine.
Market attention is now turning to the possibility of previous threats of secondary tariffs levied on India by the U.S. Trump previously said that Indian goods would be hit with an extra 25% levy as punishment for buying Russian oil on top of other tariffs, a levy expected to go into effect on Wednesday. However, the tariffs don’t appear to be deterring Indian refineries, which instead appear to be increasingly sourcing Russian oil again, Commerzbank analysts said in a note.
SUPPLY AND DEMAND: U.S. crude oil inventories fell more than expected last week as imports fell and exports rose, the latest EIA data showed. Commercial crude oil stocks fell by 6 million barrels to 420.7 million barrels in the week ended Aug. 15, against expectations of a 1.5-million-barrel fall. Stocks are around 6% below the five-year average for this time of year.
Still, markets will be firmly focused on risk of significant oversupply in the second half of the year, with global inventories likely to rise further as cartel OPEC+ unwinds voluntary production cuts.
WHAT’S AHEAD: Any further market reaction to the Jackson Hole summit will emerge when markets reopen on Monday.
At the same time, threats of new U.S. sanctions related to the invasion of Ukraine are unlikely for now, in order to avoid additional strain on a potential Putin-Zelensky meeting, Commerzbank said.
On the economic front, traders will focus on a slate of important indicators: initial jobless claims, Personal Consumption Expenditure data and consumer confidence figures.
Write to Joe Hoppe at joseph.hoppe@wsj.com
(END) Dow Jones Newswires
August 22, 2025 12:51 ET (16:51 GMT)
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