Oil Prices Swing Between Geopolitical Tensions and U.S. Demand Concerns

Global oil prices edged higher on Friday, buoyed by renewed supply risks from Russia, but gains were tempered by persistent worries over weakening U.S. demand and signs of oversupply.

Brent crude futures settled at $66.99 a barrel, up 62 cents or 0.93%, while U.S. West Texas Intermediate (WTI) closed at $62.69, up 32 cents or 0.51%. Earlier in the day, prices surged more strongly following reports of a Ukrainian drone strike on Russia’s Primorsk terminal, one of the country’s largest oil export hubs. The attack temporarily suspended loading operations, fueling expectations of tighter Russian crude and refined product flows to global markets.

However, optimism quickly faded as traders refocused on bearish economic signals from the United States. Revised labor figures suggested the economy created 911,000 fewer jobs over the past year than previously estimated, while inflation accelerated in August with consumer prices rising 0.4%, the steepest monthly gain since January. Rising inventories also weighed on sentiment, with U.S. crude stocks increasing by nearly 4 million barrels last week.

Global supply trends added further complexity. The International Energy Agency projected faster-than-expected output growth this year, largely due to OPEC+ production increases. Despite this, OPEC maintained its bullish demand outlook for both 2025 and 2026, arguing that global economic growth remains robust.

Geopolitical risks continue to underpin the market. India’s largest private port operator announced a ban on tankers under Western sanctions, a move likely to restrict Russian oil flows. India remains Russia’s biggest buyer of seaborne crude, much of which relies on vessels targeted by sanctions from the U.S., U.K., and EU. Meanwhile, discussions of potential tariffs on Russian crude exports to India and China could further reshape trade flows if implemented.

Despite these tensions, oil benchmarks remain under pressure after Thursday’s steep losses, when Brent and WTI fell 1.7% and 2% respectively. Market participants are now closely watching for policy shifts, sanctions, and demand signals from major economies, all of which will dictate whether prices find firmer support or continue their bearish drift.

Beyond the day-to-day fluctuations, the broader energy landscape is entering a phase of structural uncertainty that could redefine price dynamics well into 2026. On the supply side, Russian exports remain the single largest geopolitical risk, as attacks on infrastructure and shifting trade policies raise the prospect of sustained disruptions. At the same time, the U.S. shale sector, once a guaranteed swing producer, is facing higher financing costs, stricter environmental regulations, and declining productivity in mature basins, limiting its ability to rapidly offset outages elsewhere.

Demand signals are equally complex: while slower hiring and sticky inflation in the United States point to potential weakness, Asia’s robust consumption—driven by India’s infrastructure boom and China’s gradual industrial rebound—continues to underpin global crude appetite. Investors are also increasingly factoring in the impact of energy transition policies, with mounting investment in renewables and electric mobility reshaping long-term demand expectations. Taken together, these cross-currents suggest oil prices will remain prone to sharp, sentiment-driven swings, with geopolitical flashpoints amplifying volatility around otherwise modest supply-demand imbalances.