Price Performance Summary

In the first week, oil prices declined initially on expectations of a Russia-Ukraine ceasefire. Later, the U.S. and EU imposed a new round of sanctions on Russian oil, triggering sharp supply risk concerns and a strong price rebound, ending the week up about 6.5%.

In the second week, oil prices briefly rose on optimism surrounding U.S.-China trade talks but then retreated as the market priced in an expected OPEC production hike. Midweek, EIA data showed a much larger-than-expected inventory draw, sparking a rebound. Later, rumors of potential U.S. military action against Venezuela pushed prices higher again, but after the White House denied the reports, some gains were pared, and prices ended the week slightly lower by about 1%.

Data Update

Crude and Product Draws Outperform Expectations; Refinery Output Temporarily Capped by Maintenance

U.S. commercial crude inventories fell by a cumulative 7.8 million barrels over two weeks, reflecting strong end-market demand that encouraged refiners to draw stocks aggressively. The SPR continued its replenishment trend, adding 1.4 million barrels as the government’s refill program progressed steadily.

Product demand remained robust: gasoline inventories dropped a sharp 8.1 million barrels, far exceeding expectations and signaling strong consumer activity despite the off-season. Distillate inventories also declined by 4.8 million barrels, supported by solid industrial and freight demand, as well as strong diesel exports.

On the production side, refinery utilization rebounded by 0.9 ppt after earlier maintenance downtime and is expected to rise further. Active rig counts declined by four units, likely due to temporary refinery constraints rather than structural weakness.

Changes in the international situation

U.S. and EU Impose New Round of Sanctions on Russian Energy

On October 22, the U.S. Treasury added Rosneft and Lukoil to its sanctions list, prohibiting U.S. persons and financial institutions from conducting related transactions and freezing their U.S.-linked assets. The following day, the EU approved its 19th sanctions package against Russia, targeting 117 “shadow fleet” oil tankers (nearly 560 vessels in total) and banning long-term LNG imports from January 2027, with short-term contracts to be phased out within six months.

Rosneft and Lukoil together account for roughly 30% of Russia’s crude exports and about 5% of global output. Their inclusion means full asset freezes and loss of access to dollar-based transactions, posing major risks to Russia’s export revenue and currency inflows.

India and China are likely to feel the strongest secondary impact—India alone sources about 30% of its crude imports from Russia. Several Indian refiners warned that the new sanctions could effectively halt their purchases of Russian oil, forcing them to seek alternative supply from the Middle East or other OPEC+ members.

Notably, the Trump administration still retains several more aggressive tools, such as supplying Ukraine with long-range cruise missiles or imposing secondary sanctions on countries trading with Russian firms. So far, these options remain unused—likely to preserve negotiating leverage with Moscow and avoid excessive volatility in energy prices ahead of the U.S. election. It’s plausible that Russia may make symbolic concessions (e.g., agreeing to reopen dialogue) in exchange for partial sanction relief, allowing Trump to claim a diplomatic win while keeping domestic energy prices stable.

OPEC+ Announces December Output Increase

On November 3, eight OPEC+ members agreed to raise combined output by 137,000 bpd in December, citing a stable global outlook and balanced fundamentals. They also stated that further increases would be paused in 1Q26 due to seasonal factors.

This decision was supportive for prices. The announced hike was smaller than many had expected, and more importantly, OPEC signaled it would halt further increases in early 2026. Given that demand typically peaks between December and February, maintaining stable output in 1Q26 should help prevent oversupply next spring—sending a positive signal to the market.

Researcher Commentary

U.S. crude and product stock draws continue to outperform forecasts, confirming resilient domestic demand. This could prompt the IEA, OPEC, and EIA to revise upward their 2025 demand outlooks in upcoming monthly reports. However, such revisions do not imply weaker demand for 2026; attention should instead focus on how each agency adjusts its supply-demand balance assumptions.

On geopolitics, aside from the Russia-Ukraine war, tensions surrounding Iran’s nuclear program and the Israel-Hamas conflict have flared again. Yet oil prices have not reacted strongly, suggesting investors see limited probability of full-scale escalation. The geopolitical risk premium appears to be fading unless new sanctions or major supply disruptions occur—resembling the mid-stage pattern of the Russia-Ukraine conflict, where prices only carried modest risk premiums.

In the short term, traders should monitor geopolitical headlines, inventory data, and the three agencies’ reports. In the medium term, the focus will shift to the lagged effect of monetary easing on energy demand. Historically, demand recovery tends to appear in product and output data about three months after rate cuts and becomes more visible in commercial inventory levels roughly six months later.

Conclusion

U.S. oil fundamentals remain strong even in the off-season, with resilient consumption and steady demand structure. Geopolitical risk is currently concentrated around Russia sanctions, while other flashpoints lack the momentum to drive sustained price surges. OPEC’s plan to pause production growth in 1Q26 should help narrow the 2026 supply gap and underpin prices. Overall, near-term crude prices are expected to trade with a bullish bias, supported by tightening fundamentals and geopolitical constraints, though volatility will persist pending the release of agency reports and further sanction developments.