Oil prices ticked higher in early Thursday trading in Asia, buoyed by renewed trade tensions and a surprise decline in U.S. crude inventories. The modest rebound follows a rough week for crude, which had slumped to two-month lows on concerns over rising OPEC+ output and faltering global demand.
At the time of writing, Brent crude futures for October delivery rose 0.88% to $67.48 per barrel, while West Texas Intermediate futures climbed by 0.98% to $64.98.
The upward momentum was driven in part by a new wave of geopolitical uncertainty after President Trump signed an executive order ramping up tariffs on Indian imports. The move is a direct response to New Delhi’s continued purchases of Russian oil, with tariffs set to reach a cumulative 50% and take effect on August 28.
India is the world’s third-largest oil importer, and its increasing reliance on discounted Russian crude has drawn sustained criticism from Washington. Trump’s decision to target India comes alongside fresh warnings aimed at China, another major buyer of Russian oil. The tariff measures are part of a broader U.S. strategy to tighten pressure on the Kremlin as the war in Ukraine drags on. With Trump now saying there is a “good prospect” of a summit with Putin and Zelensky.
While Trump’s latest action adds to global tensions, analysts at ANZ pointed out that the 21-day delay before implementation leaves room for possible negotiations, potentially softening the impact.
Nevertheless, the prospect of disrupted trade routes and shifts in global oil flows injected a degree of bullishness into the market. If India and China are forced to reduce purchases from Russia under tariff pressure, they may turn to other suppliers—tightening available supply elsewhere and potentially lifting prices.
Another factor underpinning Thursday’s price recovery was an unexpectedly large drawdown in U.S. crude inventories. Weekly data from the Energy Information Administration (EIA) showed a 3 million barrel decline in crude stockpiles, far exceeding analysts’ expectations of a 200,000-barrel build.
The inventory data suggests stronger-than-anticipated demand or tighter domestic supply in the U.S., which helped offset some of the broader bearish sentiment in the market.
However, the longer-term outlook for oil does not appear to have changed. Prices are still down sharply over the past week, weighed by signs of weakening global demand and rising production among OPEC+ members.
The OPEC+ alliance, which includes Russia and Saudi Arabia, announced plans last week to proceed with a sharp output increase in September. The move comes despite the current soft pricing environment and reflects member states’ need to bolster fiscal revenues after months of underwhelming oil receipts.
If output continues rising while demand remains underwhelming, oversupply could become a persistent feature in the market heading into the fourth quarter.
Adding to the bearish undertone are recent weak economic indicators from both the United States and China. A string of disappointing manufacturing and services data has fueled concern that energy demand could stagnate or even contract in the coming months. China, in particular, has seen lackluster industrial activity and tepid consumer sentiment, raising doubts about its role as a growth engine for oil demand in 2025.
The rise of tariff politics under Trump’s leadership is injecting new volatility into the market, as traders now face the dual uncertainty of trade policy and production policy as they try to assess where prices go from here.
By Charles Kennedy for Oilprice.com
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