Oil prices are under significant downward pressure in August 2025, with WTI crude at $64.61/bbl and Brent at $67.18/bbl, representing a 15.38% decline year-over-year. The market faces a complex interplay of supply increases from OPEC+ production hikes, moderating global demand growth, and persistent geopolitical uncertainties. Key forecasts suggest continued bearish pressure through 2026, with major investment banks projecting Brent crude averaging $58-66/bbl.

Oil prices have experienced considerable volatility in 2025, with both benchmarks currently trading near multi-month lows. WTI crude futures rose to $64.98/bbl on August 7, 2025, up 0.98% from the previous day but down 14.71% compared to the same time last year. Brent crude has followed a similar pattern, with both benchmarks struggling to maintain momentum above $70/bbl despite periodic geopolitical risk

The recent price action has been heavily influenced by President Trump's move to raise tariffs on Indian goods to 50% over the country's Russian energy imports, with enforcement starting in three weeks. This has sparked concerns about supply rerouting and broader strains with key consumers, though traders are eyeing a potential Trump-Putin meeting that could soften the US stance on Russia.

Technical analysis suggests oil markets are at a critical juncture. Brent crude has been trading within a well-defined descending channel, with price action repeatedly failing to break above the upper boundary. Current resistance levels are identified at $73.80/bbl for Brent, while the $70.00 level represents crucial support that has triggered multiple reversals historically.

Global oil demand growth forecasts for 2025 show significant divergence among major agencies, ranging from 0.7 mb/d (IEA) to 1.3 mb/d (OPEC). This 600,000 bpd gap reflects uncertainty about economic growth trajectories, particularly in key consuming regions.

China's demand growth is projected to slow to just 0.2-0.3 mb/d in 2025, down from previous decades where it accounted for 60% of global growth. The IEA notes that "around 60% of this year's growth will be driven by Chinese petrochemical feedstocks", highlighting the structural shift in Chinese consumption patterns.

India emerges as a critical growth driver, with projected demand increases of 0.2-0.3 mb/d in 2025 and over 0.3 mb/d in 2026, primarily from the transportation sector. This shift reflects India's continued economic development and motorization trends.

US crude oil inventories fell by 3.029 million barrels in the week ended August 1, 2025, more than market expectations of a 1.1 million decline. This marked a reversal from the previous week's 7.698 million barrel build, indicating volatile inventory patterns driven by refinery runs and seasonal demand.

Commercial crude stocks fell to 423.7 million barrels, which remains about 6% below the five-year average for this time of year. The draw was supported by refineries operating at 96.9% of their capacity, the highest utilization rates in months, reflecting strong seasonal demand.

OECD petroleum stocks stand at 3.967 billion barrels as of April 2025, down 1.57% year-over-year and 71 million barrels below the five-year average. This persistent tightness in OECD inventories contrasts with expectations of building stocks as OPEC+ increases production.

The inventory situation presents mixed signals: while commercial stocks remain below historical averages, the pace of draws has slowed, and expectations of increased supply from OPEC+ production hikes could lead to rebuilding in the coming months.

OPEC+ announced a 547,000 bpd production increase for September 2025, completing the unwinding of their 2.2 million bpd voluntary cuts. This represents a significant strategic shift as the coalition prioritizes market share over price support.

The eight countries involved (Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman) have systematically increased output since April 2025:

This acceleration reflects multiple objectives: punishing non-compliance among members, reclaiming market share from US shale, and responding to external pressures including Trump's calls for lower oil prices.

US crude oil production averaged 13.28 million bpd during the week ending August 1, down 30,000 bpd from the previous week. The EIA projects US production will average 13.37 million bpd in 2025, representing continued growth but at a more modest pace than previous years

US shale producers face increasing cost pressures, particularly from rising steel prices and water costs in the Permian Basin. However, technological improvements and operational efficiencies continue to support production at current price levels.

Research indicates that geopolitical tensions now embed an 8-10% "insurance premium" in oil prices, with J.P. Morgan estimating this risk factor will persist amid ongoing conflicts. Recent tensions include:

The European Central Bank notes that global geopolitical shocks typically put downward pressure on oil prices through reduced economic activity, while country-specific shocks from major producers can push prices higher

Trump's escalating tariff policies present both upside and downside risks to oil demand. While tariffs on Chinese goods could reduce global economic growth and oil consumption, sanctions on Russian energy could tighten supply and support prices

The complex interplay of trade policies creates significant uncertainty for demand forecasts, with analysts noting that even a 20-percentage-point increase in the probability of a major geopolitical oil disaster would only lower output by 0.12%

Despite OPEC+'s increased production capacity, several supply risks persist:

Major investment banks converge on a bearish outlook for 2025-2026, with Brent averaging $64-66/bbl in 2025 and $56-58/bbl in 2026. This scenario assumes:

A more bearish outcome could see Brent prices drop to $55-61/bbl if multiple negative factors align:

Potential for higher prices exists if geopolitical or supply risks materialize:

The current environment favours:

Oil price volatility creates challenges for monetary policy, particularly regarding inflation management. Central banks must balance energy-driven price pressures against broader economic growth concerns, especially as trade tensions continue to evolve.

The oil market in August 2025 reflects a complex transition period where traditional OPEC+ price support mechanisms are being tested against market share considerations, while global demand growth moderates and geopolitical uncertainties persist. This environment likely favours continued volatility with a bearish bias through 2026, requiring adaptive risk management strategies across all market participants.

Risk Disclaimer: This analysis reflects current market conditions as of August 6, 2025. Rapid changes in economic data, geopolitical developments, or central bank communications could materially alter the outlook. Diversification and appropriate risk management remain essential in the current environment. None of this is financial advice, Wizard Macro Research cannot be held responsible for any losses