Oil prices were moving higher again early on Wednesday morning, recovering from oversupply fears that had driven them to five-month lows. The most recent rebound was driven by Trump’s escalating trade offensive against India over its continued imports of Russian crude.
At the time of writing, Brent crude futures had risen to $68.10 per barrel and WTI had climbed to $65.59. This modest rebound highlights the uncertainty of markets over whether Trump will follow through on his threats of further tariffs and if those tariffs would have a tangible impact on oil markets.
In his latest salvo, Trump threatened to impose additional tariffs on Indian goods within 24 hours, targeting New Delhi’s energy ties with Moscow, which he claims are helping fund the war in Ukraine.
India, which imports roughly 80% of its crude requirements, has rejected the criticism as “unjustified” and signaled no imminent change in its energy strategy. “We will protect our economic interests,” an Indian official stated, underscoring New Delhi’s commitment to diversification and affordability in its energy mix.
This latest standoff adds to the growing uncertainty around global energy flows. ING commodity strategists warned that while the market might cope with a potential reduction in Indian purchases of Russian crude, “the bigger risk is if other buyers also start to shun Russian oil.” China – the other major buyer of Russia’s crude – could also face tariffs from the U.S.
If India and China reduce Russian imports, it would squeeze available global supply just as the market braces for additional barrels from OPEC+. The oil producers’ alliance, which includes Russia, announced on Sunday it would raise output by 547,000 barrels per day starting in September, ending earlier production cuts that had propped up prices for much of the past two years.
This increase in supply, combined with weak economic signals from the U.S. and China, triggered the recent four-day oil price slide. A flurry of economic indicators—from manufacturing slowdowns to sluggish consumer spending—has raised concerns about global demand, just as more oil is set to hit the market in the second half of 2025.
It wasn’t all bullish news on Tuesday, however, with the API reporting that U.S. crude inventories fell by 4.2 million barrels last week, significantly more than the 600,000-barrel draw expected by analysts. This surprise inventory reduction suggests resilient domestic demand, which could provide a floor for prices in the near term. Analysts will be watching today’s EIA report closely to see if it confirms the API’s estimate.
In the meantime, market volatility is likely to remain elevated. Nomura Securities economist Yuki Takashima noted that while the threat of tighter U.S. sanctions may buoy prices temporarily, much depends on India’s actual response. “If India’s imports remain steady, WTI is likely to stay within the $60–$70 range for the rest of the month,” Takashima said.
As it stands, oil markets are on track for a surplus later this year and well into 2026, but that could change dramatically if Trump is able to take a significant portion of Russian oil off the market.
By Charles Kennedy for Oilprice.com
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