Crude oil analysis: Oil prices stabilize as investors focus on Russia-Ukraine conflict and US crude inventories
2025-08-27 18:28:42
On Wednesday (August 27), the price of WTI crude oil surged after opening, once touching a relatively high level, and then fluctuated and fell back, showing an overall downward trend. The intraday bears gradually took control of the rhythm, and the price center of gravity moved downward.
Ukraine has recently stepped up drone attacks on Russian energy infrastructure, with August seeing a significant increase in attacks on Russian refineries and pipelines. Ukraine has already attacked several refineries this month, causing record-high gasoline prices and localized supply shortages in Russia. Ukrainian intelligence reports indicate these attacks have impacted over 10% of Russia's refining capacity, forcing Russia to increase crude oil exports to offset domestic shortages of refined products.
Russia has begun emergency purchases of oil products from Belarus to alleviate domestic shortages. Belarusian state-owned refiner Belnef Tekhim said Russian demand for Belarusian oil products has surged over the past week. Ukraine's tactics are aimed at weakening Russia's war economy by undermining its energy export revenue.
Brent crude oil prices rose to a high of $68.50 a barrel on Tuesday as the attack in Ukraine heightened market concerns about supply disruptions, but then retreated as investors anticipated U.S. inventory data. Analysts pointed out that the continued escalation of the Russia-Ukraine conflict may continue to provide support for oil prices, but weak global demand may limit gains.
US crude oil inventory data update
According to the latest weekly report from the American Petroleum Institute (API), U.S. crude oil inventories fell by approximately 3 million barrels, gasoline inventories by approximately 2 million barrels, and distillate inventories by approximately 1.5 million barrels in the week ending August 22. This is consistent with market news cited by Reuters, indicating tightening supply. Bloomberg noted that the decline in the API data exceeded market expectations (analysts had expected a crude oil inventory draw of approximately 1 million barrels), providing short-term support for oil prices.
Official U.S. Energy Information Administration (EIA) inventory data will be released on Wednesday (22:30 Beijing time), and the market is expected to further confirm the API trend. Energy analyst John Kilduff commented: "The decline in inventories shown in the API report indicates that supply in the U.S. market is tightening, which may offset some of the pressure from geopolitical easing."
WTI crude futures recovered slightly in after-hours trading, trading near $63.30 a barrel, after the API data was released. Analysts said the inventory draw likely reflects high refinery runs following a summer demand surge and the potential impact of hurricane season on production in the Gulf of Mexico.
Russian crude oil exports and refinery attacks
Russia's increased crude oil exports in August came against the backdrop of ongoing damage to its refining capacity from drone attacks in Ukraine. The attacks partially shut down major Russian refineries, such as Rosneft's Ryazan refinery and Lukoil's Novokuznetsk refinery, forcing Russia to export more of its crude oil directly rather than processing it into refined products.
Three sources said crude oil exports from western Russian ports such as Primorsk and Novorossiysk were planned to increase by about 200,000 barrels per day (bpd) in August from the original plan, bringing the total to about 1.8 million bpd.
“The loss of refinery capacity is forcing Russia to push more crude oil onto the international market, which could further depress the discounted price of Russian Urals crude,” said Sergei Vakulenko, an analyst at energy consultancy FGE.
The drone attack in Ukraine not only affected Russia's domestic fuel supply but also posed a threat to its export revenues. Although Russia has circumvented Western sanctions through a "shadow fleet," the resulting reduction in refining capacity could make it more dependent on Asian markets such as China and India.
US Special Envoy Vitkov's Talks and Geopolitical Outlook
Bloomberg News reported that US Special Envoy Steve Witkoff plans to meet with Ukrainian representatives in New York this week to discuss a possible framework for peace talks. Witkoff also stated that the US is indirectly communicating with Russia to try to find a solution to the conflict. The market reacted to this news with mixed reactions, with hopes that peace talks would ease geopolitical risks, coupled with concerns that any agreement could lead to the easing of energy sanctions on Russia, thereby increasing global crude oil supply and depressing prices.
"If Ukraine and Russia reach a ceasefire agreement, the market may see a gradual resumption of Russian crude oil and refined product exports, which would put downward pressure on oil prices," said Morgan Stanley analyst Martijn Rats.
Vitkov's talks were facilitated by US President Trump, who recently expressed his desire to end the Russia-Ukraine conflict through diplomatic means. While the prospects for the negotiations remain uncertain, the market's sensitivity to geopolitical risks means any sign of a ceasefire could trigger fluctuations in oil prices.
Technical Analysis
(WTI 1-hour chart source: Yihuitong)
On the WTI 1-hour chart, oil prices failed to break through the $65.00 mark and started a new round of decline, falling below $64.50.
Oil prices broke below a key bullish trend line at $64.00, opening the way for further declines.
Moreover, the price of oil fell below the 50% Fibonacci retracement level of the upward move from the $61.45 swing low to $65.10 high.
WTI crude oil even fell below $63.50 and its 50-hour simple moving average (SMA). Currently, bulls are becoming active around $63.00. A new round of oil price increases could face resistance around $63.70.
At 18:27 Beijing time, WTI crude oil was quoted at US$63.15 per barrel, down 0.16%.
Ukraine has recently stepped up drone attacks on Russian energy infrastructure, with August seeing a significant increase in attacks on Russian refineries and pipelines. Ukraine has already attacked several refineries this month, causing record-high gasoline prices and localized supply shortages in Russia. Ukrainian intelligence reports indicate these attacks have impacted over 10% of Russia's refining capacity, forcing Russia to increase crude oil exports to offset domestic shortages of refined products.
Russia has begun emergency purchases of oil products from Belarus to alleviate domestic shortages. Belarusian state-owned refiner Belnef Tekhim said Russian demand for Belarusian oil products has surged over the past week. Ukraine's tactics are aimed at weakening Russia's war economy by undermining its energy export revenue.
Brent crude oil prices rose to a high of $68.50 a barrel on Tuesday as the attack in Ukraine heightened market concerns about supply disruptions, but then retreated as investors anticipated U.S. inventory data. Analysts pointed out that the continued escalation of the Russia-Ukraine conflict may continue to provide support for oil prices, but weak global demand may limit gains.
US crude oil inventory data update
According to the latest weekly report from the American Petroleum Institute (API), U.S. crude oil inventories fell by approximately 3 million barrels, gasoline inventories by approximately 2 million barrels, and distillate inventories by approximately 1.5 million barrels in the week ending August 22. This is consistent with market news cited by Reuters, indicating tightening supply. Bloomberg noted that the decline in the API data exceeded market expectations (analysts had expected a crude oil inventory draw of approximately 1 million barrels), providing short-term support for oil prices.
Official U.S. Energy Information Administration (EIA) inventory data will be released on Wednesday (22:30 Beijing time), and the market is expected to further confirm the API trend. Energy analyst John Kilduff commented: "The decline in inventories shown in the API report indicates that supply in the U.S. market is tightening, which may offset some of the pressure from geopolitical easing."
WTI crude futures recovered slightly in after-hours trading, trading near $63.30 a barrel, after the API data was released. Analysts said the inventory draw likely reflects high refinery runs following a summer demand surge and the potential impact of hurricane season on production in the Gulf of Mexico.
Russian crude oil exports and refinery attacks
Russia's increased crude oil exports in August came against the backdrop of ongoing damage to its refining capacity from drone attacks in Ukraine. The attacks partially shut down major Russian refineries, such as Rosneft's Ryazan refinery and Lukoil's Novokuznetsk refinery, forcing Russia to export more of its crude oil directly rather than processing it into refined products.
Three sources said crude oil exports from western Russian ports such as Primorsk and Novorossiysk were planned to increase by about 200,000 barrels per day (bpd) in August from the original plan, bringing the total to about 1.8 million bpd.
“The loss of refinery capacity is forcing Russia to push more crude oil onto the international market, which could further depress the discounted price of Russian Urals crude,” said Sergei Vakulenko, an analyst at energy consultancy FGE.
The drone attack in Ukraine not only affected Russia's domestic fuel supply but also posed a threat to its export revenues. Although Russia has circumvented Western sanctions through a "shadow fleet," the resulting reduction in refining capacity could make it more dependent on Asian markets such as China and India.
US Special Envoy Vitkov's Talks and Geopolitical Outlook
Bloomberg News reported that US Special Envoy Steve Witkoff plans to meet with Ukrainian representatives in New York this week to discuss a possible framework for peace talks. Witkoff also stated that the US is indirectly communicating with Russia to try to find a solution to the conflict. The market reacted to this news with mixed reactions, with hopes that peace talks would ease geopolitical risks, coupled with concerns that any agreement could lead to the easing of energy sanctions on Russia, thereby increasing global crude oil supply and depressing prices.
"If Ukraine and Russia reach a ceasefire agreement, the market may see a gradual resumption of Russian crude oil and refined product exports, which would put downward pressure on oil prices," said Morgan Stanley analyst Martijn Rats.
Vitkov's talks were facilitated by US President Trump, who recently expressed his desire to end the Russia-Ukraine conflict through diplomatic means. While the prospects for the negotiations remain uncertain, the market's sensitivity to geopolitical risks means any sign of a ceasefire could trigger fluctuations in oil prices.
Technical Analysis
(WTI 1-hour chart source: Yihuitong)
On the WTI 1-hour chart, oil prices failed to break through the $65.00 mark and started a new round of decline, falling below $64.50.
Oil prices broke below a key bullish trend line at $64.00, opening the way for further declines.
Moreover, the price of oil fell below the 50% Fibonacci retracement level of the upward move from the $61.45 swing low to $65.10 high.
WTI crude oil even fell below $63.50 and its 50-hour simple moving average (SMA). Currently, bulls are becoming active around $63.00. A new round of oil price increases could face resistance around $63.70.
At 18:27 Beijing time, WTI crude oil was quoted at US$63.15 per barrel, down 0.16%.
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