Peace Talks In Tatters, But Oil Rises Due To Massive U.S. Stockpile Draw

Meanwhile, Sinopec reports profit decline on perception of weakening demand: File Image/Pixabay

With the Russia-Ukraine peace talks unofficially deemed to be stalled, oil traders on Thursday took solace in the U.S. reporting the biggest drop in stockpiles in four months – and as a result, two key benchmarks rose by nearly $1 per barrel.

After the Energy Information Administration disclosed that stockpiles fell a massive 6 million barrels in the week ended August 15, Brent settled up 83 cents at $67.67 per barrel, and West Texas Intermediate settled up 81 cents at $63.52 per barrel.

Alex Hodes, analyst with StoneX, said, "These tight domestic stockpiles stand in contrast to the oversupply outlook projected by both the IEA and EIA for 2026, challenging traders' broader market expectations."

However, although U.S. gasoline stockpiles also declined for a fifth straight week, a seventh straight weekly buildup at the storage hub of Cushing, Oklahoma was reported, clouding a clear understanding of the true state of oil demand in the U.S.

Meanwhile, although analysts still hoped that U.S. president Donald Trump could broker a peace deal between Russia and Ukraine, the former launched a major air attack near Ukraine's border with the European Union, and the latter retaliated by claiming to hit a Russian oil refinery.

The possibility of deepening hostilities between the two countries came with news  on Thursday that a Ukrainian national had been arrested in Italy on suspicion of coordinating the 2022 sabotage of the Nord Stream pipelines, which ruptured Nord Stream 1 (which had carried 55 billion cubic meters of Russian gas annually to Germany), and left Nord Stream 2 inoperable.

Moscow had repeatedly accused Western governments for the sabotage, while Kyiv denied any involvement.

In other oil news on Thursday, Washington and the European Union finalized a trade framework that obliges Europe to invest up to $750 billion in U.S. energy purchases – including American LNG, oil, and refined fuels - by 2028, in exchange for capping most tariffs at 15 percent.

Also on Thursday, China refiner Sinopac reported a 36 percent decline in its first-half profit due to lower oil prices and refining margins plus weakening domestic demand.

Sinopec's chairman Hou Qijun estimated that while China's natural gas demand rose by 2.1 percent year-over-year in January to June, domestic consumption of refined petroleum products slumped by 3.6 percent from a year earlier, "mainly affected by alternative energy."