Overview: Crude Oil Inches Higher Amid Demand Revival Signals

Global oil prices posted modest gains as traders reacted to signs of recovering summer demand, especially from the U.S. and China—the world’s two largest crude consumers. Brent crude futures edged up by 0.2% to trade near $68.84 per barrel, while U.S. West Texas Intermediate (WTI) crude climbed 0.4% to $66.77. The rise comes after a week of sideways movement, suggesting renewed market optimism despite persistent concerns about global economic growth and rising geopolitical risks.

Demand Dynamics: China’s Refinery Output Surges

China continues to be a focal point in the oil demand recovery narrative. According to official data, Chinese refiners processed an average of 15.15 million barrels per day (bpd) in June—an 8.8% increase from the previous month and one of the highest monthly outputs on record. This reflects both seasonal restocking and signs of renewed industrial activity, particularly in manufacturing hubs near Beijing and the Pearl River Delta.

At the same time, imports surged to 12.14 million bpd, the strongest since August 2023, boosting China’s net crude surplus to 1.42 million bpd. Analysts suggest that this inventory buildup could serve as a buffer for Chinese refiners, providing flexibility in the event of future supply shocks or price spikes.

U.S. Driving Season: A Boost for Gasoline Demand

In the United States, the traditional summer driving season is underway, typically marked by increased gasoline consumption. Weekly inventory data showed a sharper-than-expected drawdown in gasoline stocks, with refiners ramping up output to meet road trip and holiday-related demand.

This seasonal surge has been a cornerstone of bullish sentiment in the oil markets during Q3, helping to offset lingering macroeconomic pessimism. The Energy Information Administration (EIA) also projected a slight upward revision in its short-term U.S. demand outlook, providing further support to crude prices.

OPEC Outlook: Steady but Watchful

The Organization of the Petroleum Exporting Countries (OPEC), along with its allies under the OPEC+ agreement, has maintained production discipline despite recent market turbulence. The group expects global demand to rise by 2.2 million bpd in 2025, with the majority of growth coming from Asia and developing economies.

However, OPEC remains cautious. Several member nations have expressed concern over rising production from non-OPEC producers, particularly in the Americas. If global inventories begin to build or demand indicators weaken, OPEC+ could reassess output policy in upcoming meetings.

Economic and Geopolitical Headwinds Remain

While demand indicators are improving, the broader economic landscape continues to cast a shadow over oil markets. Ongoing trade disputes between the U.S. and major exporters like China and Brazil have the potential to derail supply chains. Additionally, global inflation remains stubbornly high, leading to cautious spending patterns and elevated interest rates, particularly in Western economies.

Currency fluctuations are also a factor, as the stronger U.S. dollar—buoyed by shifting Federal Reserve rate expectations—can dampen demand by making oil more expensive in local currencies for importing countries.

Market Sentiment: Traders Cautiously Optimistic

Despite these headwinds, trader sentiment appears to have shifted to cautious optimism. Hedge funds and other large speculators increased their net long positions in both Brent and WTI futures, reflecting greater confidence in a sustained, albeit moderate, price recovery.

Technical indicators point to key resistance levels at $70 for Brent and $67.50 for WTI. A decisive breakout above these thresholds could invite more momentum-based buying, though much will depend on upcoming inventory reports, Chinese industrial data, and any further macroeconomic surprises from the U.S. or Europe.

Conclusion

The global oil market remains in a delicate balance. While fears of a global slowdown and geopolitical risks continue to weigh on sentiment, tangible signals of stronger summer demand—especially from the U.S. and China—are providing a near-term lift.

Crude prices may not be soaring, but the market is beginning to stabilize, driven by seasonal consumption trends and cautious optimism around Asia’s industrial rebound. For traders and analysts alike, the focus now shifts to whether this demand-driven momentum can hold steady through the remainder of the summer.