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Climbing crude inventories in line with seasonal patterns

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Yesterday’s report from the US DOE revealed an increase of 4.1 million barrels in US crude oil inventories for the previous week. This build exceeded the consensus estimate of 2.5 million barrels whilst less than the API forecast of 9 million barrels reported on Tuesday. As of last week, total US crude inventories stand at 428 million barrels, which represents a decrease of 12 million barrels compared to the same week last year.

Ole R. Hvalbye, Analyst Commodities, SEB
Ole R. Hvalbye, Analyst Commodities, SEB

In addition, gasoline inventories decreased by 3.0 million barrels, surpassing the consensus estimate of a 0.5-million-barrel drawdown. Conversely, distillate (diesel) inventories saw an increase of 0.135 million barrels, contrary to the expected decline of 1.5 million barrels. In total, commercial inventories (excluding the SPR) – which include crude oil, gasoline, and diesel – rose by 1.2 million barrels.

Refinery utilization improved by 0.5 percentage points, reaching 85% last week. Meanwhile, total products supplied (a proxy for implied demand) over the past four-week period averaged 20.3 million barrels per day, reflecting a 2.8% increase compared to the same period last year.

Additionally, gasoline demand averaged 8.3 million barrels per day over the past four weeks, up by 0.9% from the same period in 2024. Diesel demand averaged 4.2 million barrels per day, showing a significant increase of 13.6% year-on-year. Jet fuel demand also saw an increase of 4.4% compared to the same four-week period in 2024.

The International Energy Agency (IEA) will be releasing its monthly report today at 10:00 CET.

Oil inventories
Oil inventories

Analys

Brent sideways on sanctions and peace talks

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Brent crude is currently trading around USD 66.2 per barrel, following a relatively tight session on Monday, where prices ranged between USD 65.3 and USD 66.8. While expectations of higher OPEC+ supply continue to weigh on sentiment, recent headlines have been dominated by geopolitics – particularly developments in Washington.

Ole R. Hvalbye, Analyst Commodities, SEB
Ole R. Hvalbye, Analyst Commodities, SEB

At the center is the White House meeting between Trump, Zelenskyy, and several key European leaders. During the meeting, Trump reportedly placed a direct call to Putin to discuss a potential bilateral sit-down between Putin and Zelenskyy, which several European officials have said could take place within two weeks.

While the Kremlin’s response remains vague, markets have interpreted this as a modestly positive signal, with both equities and global oil prices holding steady. Brent is marginally lower since yesterday’s close, while U.S. and Asian equity markets remain broadly flat.

Still, the political undertone is shifting, and markets may be underestimating the longer-term implications. According to the NY times, Putin has proposed a peace plan under which Russia would claim full control of the Donbas in exchange for dropping demands over Kherson and Zaporizhzhia – territories it has not yet seized.

Meanwhile, discussions around Ukraine’s long-term security framework are starting to take shape. Zelenskyy appeared encouraged by Trump’s openness to supporting a post-war security guarantee for Ukraine. While the exact terms remain unclear, U.S. special envoy Steve Witkoff stated that Putin had signaled willingness to allow Washington and its allies to offer Kyiv a NATO-style collective defense guarantee – a move that would significantly reshape the regional security landscape.

As diplomatic efforts gain momentum, markets are also beginning to assess the potential consequences of a partial or full rollback of U.S. sanctions on Russian energy. Any unwind would likely be gradual and uneven, especially if European allies resist or delay alignment. The U.S. could act unilaterally by loosening financial restrictions, granting Russian firms greater access to Western capital and services, and effectively neutralizing the price cap mechanism. However, the EU embargo on Russian crude and products remains a more immediate constraint on flows – particularly as it continues to tighten.

Even if the U.S. were to ease restrictions, Moscow would remain heavily reliant on buyers like India and China to absorb the majority of its crude exports, as European countries are unlikely to quickly re-engage in energy trade. That shift is already playing out. As India pulls back amid newly doubled U.S. tariffs – a response to its ongoing Russian oil purchases – Chinese refiners have stepped in.

So far in August, Chinese imports of Russia’s Urals crude – typically shipped from Baltic and Black Sea ports – have nearly doubled from the YTD average, with at least two tankers idling off Zhoushan and more reportedly en route (Kpler data). The uptick is driven by attractive pricing and the absence of direct U.S. trade penalties on China, which remains in a delicate tariff truce with Washington.

Indian refiners, by contrast, are notably more cautious – receiving offers but accepting few. The takeaway is clear: China is acting as the buyer of last resort for surplus Russian barrels, likely directing them into strategic storage. While this may temporarily cushion the effects of sanctions relief, it cannot fully offset the constraints imposed by Europe’s ongoing absence.

As a result, any meaningful boost to global supply from a rollback of U.S. sanctions on Russia may take longer to materialize than headlines suggest.

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Analys

Crude inventories builds, diesel remain low

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U.S. commercial crude inventories posted a 3-million-barrel build last week, according to the DOE, bringing total stocks to 426.7 million barrels – now 6% below the five-year seasonal average. The official figure came in above Tuesday’s API estimate of a 1.5-million-barrel increase.

Ole R. Hvalbye, Analyst Commodities, SEB
Ole R. Hvalbye, Analyst Commodities, SEB

Gasoline inventories fell by 0.8 million barrels, bringing levels roughly in line with the five-year norm. The composition was mixed, with finished gasoline stocks rising, while blending components declined.

Diesel inventories rose by 0.7 million barrels, broadly in line with the API’s earlier reading of a 0.3-million-barrel increase. Despite the weekly build, distillate stocks remain 15% below the five-year average, highlighting continued tightness in diesel supply.

Total commercial petroleum inventories (crude and products combined, excluding SPR) rose by 7.5 million barrels on the week, bringing total stocks to 1,267 million barrels. While inventories are improving, they remain below historical norms – especially in distillates, where the market remains structurally tight.

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Analys

OPEC+ will have to make cuts before year end to stay credible

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Falling 8 out of the last 10 days with some rebound this morning. Brent crude fell 0.7% yesterday to USD 65.63/b and traded in an intraday range of USD 65.01 – 66.33/b. Brent has now declined eight out of the last ten days. It is now trading on par with USD 65/b where it on average traded from early April (after ’Liberation day’) to early June (before Israel-Iran hostilities). This morning it is rebounding a little to USD 66/b.

Bjarne Schieldrop, Chief analyst commodities, SEB
Bjarne Schieldrop, Chief analyst commodities, SEB

Russia lifting production a bit slower, but still faster than it should. News that Russia will not hike production by more than 85 kb/d per month from July to November in order to pay back its ’production debt’ due to previous production breaches is helping to stem the decline in Brent crude a little. While this kind of restraint from Russia (and also Iraq) has been widely expected, it carries more weight when Russia states it explicitly.  It still amounts to a total Russian increase of 425 kb/d which would bring Russian production from 9.1 mb/d in June to 9.5 mb/d in November. To pay back its production debt it shouldn’t increase its production at all before January next year. So some kind of in-between path which probably won’t please Saudi Arabia fully. It could stir some discontent in Saudi Arabia leading it to stay the course on elevated production through the autumn with acceptance for lower prices with ’Russia getting what it is asking for’ for not properly paying down its production debt.

OPEC(+) will have to make cuts before year end to stay credible if IEA’s massive surplus unfolds. In its latest oil market report the IEA estimated a need for oil from OPEC of 27 mb/d in Q3-25, falling to 25.7 mb/d in Q4-25 and averaging 25.7 mb/d in 2026. OPEC produced 28.3 mb/d in July. With its ongoing quota unwind it will likely hit 29 mb/d later this autumn. Staying on that level would imply a running surplus of 3 mb/d or more. A massive surplus which would crush the oil price totally. Saudi Arabia has repeatedly stated that OPEC+ it may cut production again. That this is not a one way street of higher production. If IEA’s projected surplus starts to unfold, then OPEC+ in general and Saudi Arabia specifically must make cuts in order to stay credible versus what it has now repeatedly stated. Credibility is the core currency of Saudi Arabia and OPEC(+). Without credibility it can no longer properly control the oil market as it whishes.

Reactive or proactive cuts? An important question is whether OPEC(+) will be reactive or proactive with respect to likely coming production cuts. If reactive, then the oil price will crash first and then the cuts will be announced.

H2 has a historical tendency for oil price weakness. Worth remembering is that the oil price has a historical tendency of weakening in the second half of the year with OPEC(+) announcing fresh cuts towards the end of the year in order to prevent too much surplus in the first quarter.

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