Oil Rises on Diesel Tightness, Iraq Outages and Demand Surge

As of July 18, 2025, crude oil prices have maintained recent gains, supported primarily by tightness in the diesel market amid robust seasonal demand, despite broader concerns over potential future supply surpluses. The global benchmark Brent crude is trading near $70 per barrel, following a 1.5% increase on the previous day, while West Texas Intermediate (WTI) has shown similar upward momentum.

Key factors contributing to this stability include elevated summer demand for diesel in major markets such as Europe and the United States, where gasoil futures remain backward, a structure indicating premium pricing for immediate deliveries due to constrained near-term supplies. This tightness stems from low diesel inventories, influenced by prior refinery run cuts in late 2024, sanctions on Russian oil exports, and OPEC+ production adjustments that have reduced the availability of heavy crude feedstocks essential for diesel production. Additionally, positive U.S. economic indicators have bolstered market sentiment, offsetting worries about global oil stockpiles building in less price-sensitive regions.

Geopolitical developments have further underpinned the diesel market’s strength, with the European Union’s recent imposition of a lower price cap on Russian crude as part of its 18th sanctions package against Moscow, alongside restrictions on fuels derived from Russian petroleum. These measures have heightened concerns over European diesel imports, potentially exacerbating supply constraints. On the demand side, U.S. inventories have shown draws in distillates, including diesel, amid strong consumption. However, overall fuel stockpiles have experienced builds that tempered some gains earlier in the week.

Looking ahead, analysts express caution regarding the sustainability of diesel-driven support, as OPEC+ continues to ease output curbs, which could lead to a supply glut later in 2025. Broader market dynamics, including U.S. tariff policies and trade tensions, may introduce additional volatility, though current tightness in refined products like diesel is expected to provide near-term resilience