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Prices were buoyed by a mix of bullish supply-side headlines. The U.S. imposed fresh sanctions on an Iranian shipping network moving large volumes of crude and liquid petroleum gas. This move adds pressure on global crude supply at a time when physical balances appear to be tightening.
Industry data from the American Petroleum Institute showed a larger-than-expected draw in U.S. crude inventories—down 4.6 million barrels last week. Gasoline and distillate stocks also declined by 2.2 million and 1.6 million barrels, respectively. The draw adds credence to expectations for tighter balances heading into peak demand season. Market participants await official stockpile data from the U.S. Energy Information Administration later today.
Traders Weigh Macro Headwinds and Political Risk Premium
On the demand side, sentiment improved slightly after President Trump signaled potential flexibility in tariff negotiations with China. The White House’s softer stance eased fears of a prolonged trade war, which had weighed on global demand expectations. Treasury Secretary Scott Bessent also hinted at possible de-escalation, helping to support risk appetite across energy markets.
At the same time, President Trump stepped back from earlier threats to remove Fed Chair Jerome Powell, a move seen as stabilizing for broader financial markets. His reversal removed a potential source of market volatility and helped lift investor sentiment, albeit cautiously.
IMF Warnings Limit Upside in Oil Prices Projections
However, upside potential remains capped by economic headwinds. The International Monetary Fund slashed its U.S. growth outlook to 1.8% for 2025, down from 2.7%, citing trade tensions and weakening consumer indicators. Global growth is now forecast at 2.8%, while U.S. inflation expectations were raised to 3%, adding pressure on central banks to maintain tight policy stances.
Although the IMF is not calling for a recession, the increase in recession odds to 40% and stronger inflation forecasts for major economies signal macro risks that could dampen oil demand over time.
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