Global energy markets entered the week on edge as renewed geopolitical tensions pushed crude oil prices higher, offsetting otherwise bearish supply‑demand fundamentals.
Crude began Monday with a sharp rebound, driven by fears of supply disruptions linked to Washington’s latest restrictions on Russian exports and intensifying Ukrainian strikes on energy infrastructure.
“Crude oil prices began the week with a rebound fueled by fears that Russian supply could be disrupted amid new US sanctions and escalating Ukrainian attacks on energy infrastructure.
“Brent rose 1.60 per cent from the opening, reaching the US$68.40 per barrel area, while West Texas Intermediate (WTI) climbed above US$65.00 with a gain of more than 2.00 per cent,” said Antonio Di Giacomo, Financial Markets Analyst for LATAM at XS.
The rally underscores the market’s sensitivity to geopolitical risks, even as fundamentals point toward an oversupplied environment into late 2025.
“The geopolitical backdrop once again emerged as the primary catalyst for energy markets. Washington warned of new sanctions that would further restrict Russian crude exports, while Kyiv has intensified its strikes on refineries and strategic storage sites,” Di Giacomo said.
“These actions raise concerns about the stability of global supply, even though supply-and-demand fundamentals suggest a relatively loose market heading into the fall.”
Despite Monday’s bounce, analysts see supply gains from OPEC+ and recovering production in countries like Libya and Nigeria outweighing demand.
“In fact, analysts expect global supply to outpace demand in the coming months due to increased production from OPEC+ and the gradual recovery of output in key countries such as Libya and Nigeria,” Di Giacomo explained.
“However, geopolitical volatility adds a layer of uncertainty that clouds short-term price direction.”
Energy markets also face turbulence from shifting trade dynamics.
“At the same time, international trade dynamics introduce new risks,” Di Giacomo noted.
“The US administration is considering additional tariffs on India over its growing purchases of Russian crude oil, which could further strain global energy trade and disrupt supply chains.
“This scenario coincides with the return of protectionist measures promoted by Donald Trump, heightening perceptions of a worldwide economic slowdown.”
Markets greeted the Federal Reserve’s hint of possible September rate cuts with some optimism, but doubts persist about whether easier monetary policy can counterbalance trade fragmentation and sluggish growth.
“Against this backdrop, financial markets reacted cautiously,” Di Giacomo said.
“While the Federal Reserve’s signal that it may consider rate cuts in September offered some relief, doubts remain as to whether such measures will be enough to offset the impact of a more fragmented global trade system and cooling global growth.”
Investor positioning reflects this caution.
“Volatility is also evident in institutional investor behaviour, with many reducing long positions in oil, betting that geopolitical tensions alone may not sustain a prolonged price rally,” he added.
“At the same time, demand in Asia shows signs of slowing, particularly in China, where fiscal stimulus has yet to deliver a solid recovery in energy consumption.”
Meanwhile, European markets continue to grapple with high natural gas prices, prompting governments to shore up reserves and accelerate energy transition policies.
“Europe, for its part, faces the challenge of balancing its strategic reserves while grappling with still-high natural gas prices,” Di Giacomo observed.
“This has pushed several countries to reinforce their energy transition efforts, which could reduce crude oil dependence in the medium term, though without immediate impact on pricing dynamics.”
Summarising current market conditions, Di Giacomo concluded: “In conclusion, the crude oil market finds itself in a fragile balance between fundamentals and external tensions.
Di Giacomo noted that while global oil supply is expected to exceed demand by the end of the year, geopolitical and trade uncertainties are still the key drivers causing price fluctuations.
He emphasised that investors will closely watch how sanctions on Russia evolve, how India responds, and the effects of US trade policies.
Di Giacomo also highlighted that although potential Federal Reserve rate cuts could provide some relief to the market, they are unlikely to fully stabilise crude oil prices through the remainder of 2025.