Oil Swings as Traders Weigh Bearish US Data Against Sanctions

Key Points

• It seems likely that oil prices are swinging as traders weigh bearish U.S. economic data against the impact of sanctions and geopolitical tensions.

• Research suggests U.S. economic indicators, such as lower oil production forecasts and weak demand, are putting downward pressure on prices, while sanctions on Iran and Russia are supporting higher prices due to supply risks.

• The evidence leans toward controversy, with tariffs and trade tensions adding complexity to market dynamics, affecting both demand and supply forecasts.

Oil Price Movements

Oil prices are experiencing volatility, with recent data showing Brent crude settling at $70.15 per barrel and WTI at $68.33 per barrel on July 8, 2025, up from recent lows due to a mix of factors. This swing reflects traders balancing bearish U.S. economic data with bullish supply-side risks.

U.S. Economic Data Impact

U.S. economic data, including lower-than-expected oil production forecasts for 2025 and weak second-quarter deliveries, suggest reduced demand, contributing to bearish market sentiment. The Conference Board estimates tariffs will lower GDP growth, raise inflation, and weaken the labor market, potentially prompting Fed rate cuts, which could further impact oil demand.

Sanctions and Geopolitical Tensions

Sanctions, particularly on Iran and Russia, are creating supply-side pressures. Despite steady Iranian exports, any disruption could tighten supply, while intensified U.S. sanctions on Russian oil exports add to market uncertainty. Geopolitical risks, like Houthi attacks in the Red Sea, are also supporting higher prices.

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Comprehensive Analysis of Oil Price Swings Due to U.S. Economic Data and Sanctions

This note provides a detailed examination of the current volatility in oil prices, driven by traders weighing bearish U.S. economic data against the impact of sanctions and geopolitical tensions, as observed on July 9, 2025, at 10:27 AM PDT. The analysis covers oil price movements, the influence of U.S. economic indicators, the role of sanctions, and broader market dynamics, drawing from recent reports and official data.

Oil Price Movements and Market Context

Oil prices are experiencing significant swings, reflecting a balance between bearish and bullish factors. Recent data from Reuters on July 8, 2025, indicates that Brent crude futures rose 57 cents, or 0.8%, to settle at $70.15 a barrel, while U.S. West Texas Intermediate (WTI) crude closed at $68.33, up 40 cents, or 0.6%. These were the highest closes for both benchmarks since June 23, 2025, for a second consecutive day. Trading Economics data from July 9, 2025, shows Crude Oil at 68.20 USD/Bbl, up 0.02% from the previous day, though still 16.94% lower than a year ago, highlighting ongoing volatility.

The U.S. Energy Information Administration (EIA) Short-Term Energy Outlook, released on July 8, 2025, forecasts Brent crude oil prices to average $69 per barrel for 2025, which is $3/b higher than the previous month's STEO, driven by a more significant geopolitical risk premium from the conflict over Iran's nuclear program that escalated in mid-June. However, the forecast expects significant global oil inventories to build, putting consistent downward pressure on prices, with Brent averaging $58/b in 2026. This forecast was completed before OPEC+ announced on July 5, 2025, that it would raise production targets for August, adding another layer of complexity.

U.S. Economic Data and Bearish Impact

The bearish U.S. economic data contributing to oil price swings includes several key indicators. The International Energy Agency (IEA) Oil Market Report for June 2025 notes that world oil demand growth for 2025 is forecast at 720 kb/d, marginally below last month's estimate, with weak 2Q25 deliveries in the United States contributing to this reduction. The IEA's April 2025 report revised global oil demand growth down by 300 kb/d to 730 kb/d, citing escalating trade tensions negatively impacting the economic outlook, expected to slow further in 2026 to 690 kb/d.

The Conference Board's Economic Forecast for the US Economy, dated June 10, 2025, estimates that tariffs will substantially lower GDP growth, raise inflation, weaken the labor market, and prompt Fed rate cuts. This aligns with the EY US Economic Outlook from June 9, 2025, which states the US economy is poised for a summer slowdown, with economic activity artificially boosted early in 2025 as businesses and consumers front-loaded purchases ahead of anticipated trade restrictions. Both consumer spending and business investment are expected to decelerate significantly, with the ripple effects of higher tariffs becoming more apparent, stoking inflationary pressures, weakening labor market conditions, compressing profit margins, restraining capital expenditures, and curbing household demand.

Deloitte Insights' Q2 2025 US Economic Forecast, dated June 24, 2025, notes that the Fed’s hesitance to cut rates quickly is due to the inflationary impulse of tariffs, bringing the core PCE price deflator up to 3.6% on a year-over-year basis by the fourth quarter of 2025. Higher tariff costs coupled with elevated interest rates cause businesses to slow their pace of investment and hiring throughout the remainder of 2025 and into 2026, further impacting oil demand.

Specific US economic data, as mentioned in the Reuters article from July 8, 2025, includes lower-than-expected US oil production forecasts for 2025, with the EIA outlook indicating less production than previously anticipated. Additionally, US crude stockpiles decreased by 2.1 million barrels last week, per a poll, with API and EIA set to release weekly data on Tuesday and Wednesday, respectively. Recent stockpile trends show a decrease of 3.4 million barrels for the same week last year, compared to a 5-year average increase of 1.9 million barrels (2020-2024), suggesting a tightening supply that could offset some bearish demand pressures.

Sanctions and Geopolitical Tensions

On the bullish side, sanctions and geopolitical risks are supporting higher oil prices by creating supply-side pressures. The IEA Oil Market Report for June 2025 mentions that Iran's oil exports have remained unchanged at around 1.7 mb/d so far this year, with most going to China, despite intensified U.S. sanctions. The March 20, 2025, Reuters article notes that oil prices rose after the U.S. issued new Iran-related sanctions, targeting entities including Chinese "teapot" refineries, with Brent crude settling up $1.22, or 1.72%, at $72 a barrel, and WTI up $1.10 or 1.64% at $68.26.

The U.S. Department of the Treasury's press release from January 9, 2025, details intensified sanctions against Russia, targeting its oil production and exports, including blocking major producers like Gazprom Neft and Surgutneftegas, and sanctioning over 180 vessels, many part of the "shadow fleet." The IEA Oil Market Report for January 2025 notes that new, more expansive US sanctions on Russia, announced on January 10, 2025, may affect oil supply flows, adding to market uncertainty.

Geopolitical tensions, such as renewed Houthi attacks on shipping in the Red Sea, are also contributing to price support, as mentioned in the Reuters article from July 8, 2025. The article states that these attacks, along with worries about U.S. tariffs on copper, have helped oil prices edge up to a two-week high, with Phil Flynn, an analyst at Price Futures Group, noting, "The lower (U.S.) production outlook got the price rally going and it kept going along with other commodities on the copper tariff news and the increased tensions in the Red Sea."

The December 31, 2024, Reuters article mentions that investors are watching the Federal Reserve's interest rate-cut outlook for 2025, with some analysts believing supply could tighten next year depending on Trump's policies, including potential re-imposition of a maximum pressure policy toward Iran, which could have major implications for oil markets. Phil Flynn is quoted saying, "With the possibility of tighter sanctions on Iranian oil with Trump coming in next month, we are looking at a much tighter oil market going into the new year," citing firming Indian demand and recent stronger Chinese manufacturing data.

Comparative Analysis of Factors

To provide a clearer picture, the following table compares the bearish and bullish factors affecting oil prices:

Factor	Bearish Impact (U.S. Economic Data)	Bullish Impact (Sanctions and Geopolitics)
Oil Demand Growth	Revised down to 720 kb/d for 2025, weak Q2 deliveries	N/A
Production Forecasts	Lower US oil production for 2025, per EIA	Potential supply disruptions from sanctions on Iran, Russia
Stockpile Trends	US crude stockpiles down 2.1M barrels last week	N/A
Economic Outlook	Tariffs lower GDP growth, raise inflation, weaken labor	N/A
Geopolitical Risks	N/A	Houthi attacks in Red Sea, potential tighter sanctions
Price Impact	Downward pressure on prices due to weaker demand	Upward pressure due to supply risks, recent highs at $70.15 Brent, $68.33 WTI

This table highlights the opposing forces, with U.S. economic data suggesting weaker demand and sanctions creating supply-side risks, contributing to the current price swings.

Broader Context and Industry Trends

The oil market's reaction is part of a broader context of escalating trade tensions and tariff policies, as noted in the IEA reports and economic forecasts. The J.P. Morgan Research article from May 15, 2025, forecasts Brent crude at $66/bbl for 2025 and $58/bbl for 2026, pointing to lower oil prices due to supply-demand dynamics, especially with OPEC+ boosting production. However, the actual market movements in July 2025 show prices above these forecasts, suggesting that sanctions and geopolitical risks are outweighing the bearish economic data in the short term.

The EIA's Today in Energy article from January 20, 2025, forecasts lower oil prices in 2025 amid significant market uncertainties, with world liquid fuels consumption growing more slowly than before the pandemic, led by slower growth in China and other emerging markets. This aligns with the bearish outlook but is countered by the recent price increases due to sanctions.

Conclusion

Oil prices are swinging as traders balance bearish U.S. economic data, including lower production forecasts, weak deliveries, and a challenging economic outlook due to tariffs, against bullish factors like sanctions on Iran and Russia, and geopolitical tensions such as Houthi attacks. Recent data shows Brent at $70.15 and WTI at $68.33 per barrel on July 8, 2025, reflecting this volatility. The controversy lies in the interplay of trade policies and geopolitical risks, with significant implications for global oil markets as observed on July 9, 2025.

Citations:

• U.S. Energy Information Administration - Short-Term Energy Outlook

• Reuters - Oil prices edge up to two-week high

• International Energy Agency - Oil Market Report - June 2025

• Conference Board - Economic Forecast for the US Economy

• EY - US Economic Outlook June 2025

• Deloitte Insights - US Economic Forecast Q2 2025

• U.S. Department of the Treasury - Treasury Intensifies Sanctions Against Russia

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