Opening snapshot: Calm prices, complex fundamentals

Global benchmark Brent crude has traded in a narrow band around $65 to $70 a barrel since July, leaving the market appearing unusually steady in the face of multiple disruptive signals. For the coming session traders will weigh a mixture of fresh political pressure on Russian energy supplies, ongoing uncertainty about China’s true consumption and stockpiling behavior, and growing opacity in oil flows from sanctioned producers. Together these forces create a market that can move sharply on new information, even if headline prices have been relatively unchanged recently.

Why geopolitics matters this morning

Political developments continue to shape near-term risk. The European Union is under rising pressure to end purchases of Russian fossil fuels as leaders consider speeding up the phaseout of Russian energy imports. At the same time, statements from the United States urging NATO members to halt purchases of Russian oil and to impose tariffs on China, the largest buyer of Russian crude, add another layer of political risk. Implementing such measures will be difficult. Turkey remains the third-largest importer of Russian oil, and EU members such as Hungary and Slovakia continue to receive sizeable Russian crude flows. Russia also still supplies roughly 12 percent of the EU’s gas imports, keeping energy ties materially intact even as policy rhetoric intensifies.

Operational risks persist as well. Recent strikes and drone attacks have targeted Russian petrochemical facilities and refineries, and sources say Moscow is close to cutting oil output as a result. Those developments underscore how quickly supply-side disruptions can crystallize into market-moving events when production infrastructure is under threat.

China’s hidden role: A major source of uncertainty

China remains the largest single source of uncertainty in global oil demand assessment. Chinese crude imports have consistently exceeded reported refinery processing rates this year, suggesting a substantial build-up in onshore inventories. For the first eight months of the year the average surplus in China reached roughly 990,000 barrels per day, nearly 1 percent of global demand according to calculations referenced in the newsletter. At the same time, Chinese refineries ran at elevated throughput in August, processing 14.94 million barrels per day, the second-highest monthly total in over a year.

The gap between rising imports and consumption estimates points to at least two possible realities. One is that significant barrels are being placed into storage rather than consumed, which would imply a looser market than headline demand figures suggest. The other possibility is larger blind spots in China’s domestic demand data, which would mean actual consumption may be stronger or weaker than external estimates indicate. Either outcome creates risk for traders who must forecast global balances without a reliable view of the second-largest oil consumer.

Inventories, the shadow fleet and opaque flows

Global inventory metrics are less informative than in the past. Historically, OECD stocks reported to international agencies served as the primary gauge of global supply buffer. Today China has added an estimated 73 million barrels to onshore crude storage since the start of the year, bringing total reported storage to about 1.18 billion barrels or around 60 percent of capacity according to satellite analytics cited in the newsletter. By comparison, OECD industry and government-controlled stocks rose by about 40 million barrels between January and July.

Compounding the inventory picture is a growing reliance on a so-called shadow fleet of tankers to move oil from countries under extensive western sanctions. Producers such as Russia, Iran and Venezuela together account for around 13.5 million barrels per day, roughly 13 percent of global supply. The shadow fleet increases opacity in where barrels ultimately land, how quickly they are consumed, and whether they are counted in official inventories. For market participants this increases the chance that price does not fully reflect the actual supply-demand balance.

Divergent demand forecasts widen trading risks

Forecasters provide very different near-term views of demand, adding another layer of uncertainty. The International Energy Agency expects consumption to grow by about 740,000 barrels per day in 2025 and by roughly 700,000 barrels per day in 2026. In contrast OPEC projects growth of around 1.3 million barrels per day this year and another 1.4 million next year. This represents one of the widest gaps in recent memory and helps explain why traders may be reluctant to make large directional bets while such major agencies disagree.

Market implications and what to watch in the session

Given these factors expect price sensitivity to several data points and headlines. Any official moves within the EU to accelerate the phaseout of Russian fuel imports or new trade actions targeting China’s purchases of Russian crude would raise immediate supply risk and could push prices higher on shorter-term tightness concerns. Conversely, confirmation that China is stockpiling rather than consuming incremental imports would suggest a softer demand backdrop and could cap gains or push prices lower.

Operationally, further reports of damage to Russian refining or export infrastructure from drone strikes would feed supply disruption fears and support upward price movement. Traders will also watch inventory releases and regional power sector developments, including electricity production impacts from strikes in France that have reduced output, as these can influence near-term fuel demand.

Finally the continued use of shadow shipping complicates liquidity and risk premia. Any intelligence or satellite-based reports that clarify where sanctioned barrels are going or whether they are moving into storage could trigger notable market moves as participants update their implicit demand and supply balances.

Trading stance for the session

For the coming session the balance of risks favors event-driven volatility rather than persistent trending behavior. Momentum strategies should be paired with tight risk controls given the potential for sudden swings from geopolitical headlines or fresh data on Chinese stocks. Traders focused on tactical opportunities may find value in short-term options hedges around major political announcements and in watching high-frequency indicators to detect changes in flows and storage patterns faster than consensus revisions.

In short, headline prices may look calm but the underlying market is fractured by conflicting indicators and opaque flows. This creates fertile ground for abrupt price moves once a new piece of credible information shifts the balance of belief about global spare capacity and demand true-up.

Key items to watch during the session

Look for any announcements from the EU about accelerating the phaseout of Russian fossil fuel imports, statements from NATO members or the United States regarding trade measures on China, fresh Chinese import and refinery throughput updates, satellite or market reports on shadow fleet movements, and any operational damage reports from the Black Sea region and Russian facilities. Each of these could be the catalyst that takes the market out of its recent range.