Morning Highlights: Oil rises to three-week high on China demand, Russia sanctions risk

Monday, July 14, 2025

Oil prices climbed on Monday, reaching their highest levels since late June as investors weighed further U.S. and EU sanctions on Russia, while China’s strong crude imports in June added to support in a market still navigating tight physical conditions.

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Market snapshot (as of 6:30 EST):

• Brent (September): $71.34 (▲$0.98)

• WTI (August): $69.04 (▲$1.05)

Both benchmarks extended last week’s gains—Brent rose 3% and WTI added 2.2%—as market tightness overshadowed bearish longer-term forecasts.

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Trump teases ‘major’ Russia sanctions

U.S. President Donald Trump is expected to announce new sanctions on Russia later today, after stating Sunday he would send Patriot missile systems to Ukraine in a bid to push Moscow into peace negotiations.

The move comes as bipartisan support builds in Congress for tougher measures against Russia, including legislation targeting its energy sector. European Union envoys, meanwhile, are finalizing a new sanctions package that includes a lower oil price cap, EU sources said.

“Expectations around U.S. sanctions and China’s import data are driving the bullish tone,” said UBS analyst Giovanni Staunovo.

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China crude imports surge to 11-month high

Chinese customs data on Monday showed crude oil imports in June rose 7.4% year-over-year to 12.14 million barrels per day, the highest monthly figure since August 2023.

Analysts expect China to continue stockpiling crude, but with inventories nearing 95% of 2020’s peak levels, excess oil could spill into visible markets in the West, pressuring benchmark prices later this year.

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Physical tightness persists amid mixed demand outlook

Despite rising production and concerns about slower global growth, prompt oil markets remain firm:

• OECD crude inventories are 97 million barrels below year-ago levels, per the IEA.

• U.S. diesel inventories are 23% below the five-year seasonal average.

• Inventories at Cushing, Oklahoma, are at their lowest in 11 years, according to Bloomberg.

Refining margins remain tight, raising the risk of diesel shortages heading into late summer, according to analysts at Sparta Commodities and BOK Financial.

“Refiners cut runs due to weak margins, but now we’re short on diesel heading into peak demand,” one trader told the Wall Street Journal.

“Catching up may mean higher prices.”

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Forecasts still call for Q4 surplus

Despite current strength, some analysts maintain a bearish tilt for the second half:

• ING projects the global oil market will swing into a large surplus in Q4 as OPEC+ completes its supply ramp-up and demand begins to ease post-summer.

• The group’s next meeting on August 3 is expected to confirm a final 550,000 bpd increase, unwinding all 2.2 million bpd of 2023’s voluntary cuts.

OPEC also cut its medium-term demand outlook last week, lowering its 2026 forecast to 106.3 million bpd, citing slower Chinese growth and rising EV adoption.

“Right now, the market is tight,” said Rapidan Energy’s Bob McNally.

“But that balance could tip once summer demand cools and the last OPEC+ barrels hit the market.”

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Factors to watch this week:

• President Trump’s Russia announcement and any follow-up on U.S. sanctions.

• EU decision on its 18th sanctions package and revised price cap.

• Inventory data from the U.S. Energy Information Administration (EIA) on Wednesday.

• Progress in U.S. trade talks, with the tariff deadline on August 1 looming.