Russia attacks Ukraine: Russia launched a large-scale overnight attack on Ukraine using 400 drones and a missile, targeting cities like Kharkiv, Kryvyi Rih, and Vinnytsia, and damaging energy infrastructure while injuring at least 15 people. Ukraine’s air force reported that most drones were intercepted, but 12 targets were hit, causing power outages for 80,000 families and disrupting water supplies. President Zelenskyy called for stronger air defenses and more interceptors, emphasizing the need for a systemic response to Russia’s continued aggression. In Vinnytsia, a Polish-owned factory was struck, prompting Poland’s foreign minister to accuse Russia of deliberate targeting. A 17-year-old boy was critically injured in Kryvyi Rih, and multiple explosions were recorded in Kharkiv. The attacks were cited by U.S. President Trump as justification for approving more weapons for Ukraine. Meanwhile, Russia continues to justify its strikes on civilian infrastructure as part of its war effort, while Ukraine also conducts limited long-range strikes into Russian territory.

Russian Oil Price: The average price of Russian oil in rubles has remained below the federal budget’s 2025 target, adding pressure to a budget already strained by a growing deficit. This shortfall is largely due to the rouble strengthening by about 45% since the start of the year, driven by easing geopolitical tensions and tight monetary policy. While international oil prices have dropped around 10%, Russia’s oil blend averaged 4,701 rubles per barrel in early July—11.1% below the budget’s target of 5,281 rubles. The finance ministry reported a budget deficit of 3.69 trillion rubles in the first half of the year, matching the full-year forecast. In April, Russia raised its 2025 deficit estimate from 0.5% to 1.7% of GDP after cutting its energy revenue forecast by 24%. Meanwhile, defense spending has surged to 6.3% of GDP, the highest since the Cold War, as the war in Ukraine continues. The oil price in rubles is based on a stronger exchange rate than budgeted, further complicating fiscal planning.

China’s Surplus Crude Oil Surges: China’s crude oil stockpiles rose sharply in June as refiners took advantage of favorable market conditions to boost imports. The surplus gives refiners more flexibility to adjust output based on demand and pricing trends. Analysts attribute the buildup to strategic purchases at lower global prices. State-owned enterprises have secured long-term contracts with major exporters like Saudi Arabia and Russia. These moves are part of China’s broader strategy to enhance energy security and reduce exposure to market volatility. The increased reserves also position China to respond quickly to future supply disruptions. This trend reflects China’s growing influence in global energy markets.

Market Overview: Oil prices fell by about 1% on Wednesday as investor concerns over U.S. tariffs outweighed signs of stronger Chinese crude demand. U.S. West Texas Intermediate crude dropped to $65.83 per barrel, pressured by fears that tariffs on the EU and Russia could slow global economic growth and fuel consumption. Despite this, Chinese refiners are ramping up production to meet rising third-quarter demand, with oil demand estimated to have grown by 400,000 barrels per day in the first half of the year. OPEC’s latest report also forecast stronger global economic performance in the second half of the year, supporting a more optimistic oil demand outlook. However, rising U.S. crude, gasoline, and distillate inventories added to downward pressure on prices.

Canada’s oil sands producers, including Imperial Oil and Suncor, have become some of North America’s lowest-cost oil suppliers thanks to automation, robotics, and cost-cutting innovations. While U.S. shale producers are scaling back due to lower prices and rising costs, Canadian firms have maintained production and spending plans, benefiting from long-life assets and improved efficiency. Technologies like autonomous trucks and dog-like inspection robots have helped reduce labor costs and increase productivity, with Imperial saving $22 million annually and boosting output at its Kearl mine by 20%. Suncor’s use of the world’s largest hydraulic mining shovel and standardized maintenance practices has also lowered its break-even price. Overall, Canada’s top oil sands companies can now break even at WTI prices between $40.85 and $43.10, down from $51.80 just a few years ago. Unlike shale wells, oil sands projects have high startup costs but long lifespans, offering decades of stable output. With reduced debt and strong returns, oil sands producers are increasingly attractive to investors seeking low-risk, high-efficiency energy assets.

U.S. oil prices slipped slightly as rising gasoline and distillate inventories signaled weaker fuel demand despite a drop in crude stockpiles. Gasoline stocks rose by3.4 million barrels and distillates by 4.2 million, both far exceeding expectations. Crude inventories fell by 3.9 million barrels, but this was overshadowed by the refined product builds. Gasoline demand dropped by 670,000 barrels per day after the July 4 holiday, disappointing investors during th epeak summer driving season. Economic concerns also weighed on prices, with U.S. tariff threats against the EU and Russia raising fears of slower global growth. However, Chinese oil demand showed strength, rising by 400,000 bpd year-on-year as refiners ramped up output. OPEC remains optimistic, forecasting stronger global economic performance in the second half of the year, led by China, India, and Brazil.