Market view Oil: Bearish sentiment dominates
Brent has been stable over in September, trading in a USD 69 to USD 65,5 range without a clear direction. In times of writing, we are at the lower end of that range and basically at the same level compared to where we were two weeks ago.
However, in general, the market sentiment is bearish, and prices tend to edge lower if there is no support from either risk appetite, sanctions or geopolitics. This is a typical indication that the market is bearish, or we are in a “sell on upticks” market.
Last week, we discussed the two bearish oil market reports from the IEA and EIA, which both point to a significant inventory build in Q4 and H1 2026.
If the inventories rise as forecasted, the bearish sentiment in oil could easily push Brent out of the recent months' USD 65-70 range on the downside. USD 60 for Brent could be the first target for the market. And a move towards a USD 50-55 range is not unlikely.
However, geopolitics and sanctions are still strong supportive factors. Still, it appears that the market is increasingly adapting to the vast amount of sanctions and geopolitical news, essentially ignoring them. The market also seems to have concluded that the US will not tighten sanctions on Russia. However, we reiterate that the Ukrainian “sanctions” on Russian oil installations are highly effective. The latest refinery to be hit was the 200,000 bp/d Salavat refinery in the Southern Urals.
On Friday, the focus was on the EU’s 19th sanctions package announcement. However, there were only a few specific details regarding the oil market. We note that another 118 vessels in the shadow fleet were sanctioned. It was also stated that refineries, oil traders and petrochemical companies in third countries – including China – would be targeted. This underlines that the risk is to the upside for product cracks such as diesel, jet fuel and gasoil (Marine Gas Oil).
Trump has openly exploited the fact that the EU, via Hungary and Slovakia – two Russia-friendly EU countries – continues to buy Russian oil. He has said directly that as long as the EU keeps buying Russian energy, the U.S. will not tighten sanctions on Russia. Sometimes, Trump also mentions NATO. It is, of course, highly unrealistic that the EU should be able to force Turkey to stop buying Russian oil.
Bloomberg wrote on Saturday that the EU is considering trade measures specifically targeting Hungarian and Slovak oil imports. Unlike sanctions, which Hungary and Slovakia can block, such measures do not require unanimity, but only a simple majority among member states.
All EU member must now approve the sanctions package itself states in the European Council.
Over the weekend, Trump said he did not like Russia’s violations of several Eastern European countries’ airspace during the past week. However, so far, the market has concluded that the U.S will impose no further sanctions.
We continue to see risk on the upside for diesel, gas oil, jet fuel and other distillate cracks from the Ukrainian attacks. Today, news media reported that Russia is discussing halting diesel exports.
One reason the market has so far dismissed the increasing warnings about inventory builds may be that China has stockpiled a significant amount of oil in 2025. If the Chinese inventory build continues over the next six to nine months, it will give strong underlying support to the market. We have a poor oversight of Chinese inventories. Market sources indicate that China has purchased 150 million barrels of crude oil in excess of its actual consumption.
