Oil prices slipped in early Asian trading on Thursday, giving back some of the previous session’s gains as traders prepared for the end of the summer driving season and closely watched trade tensions between the U.S. and India.
At the time of writing, West Texas Intermediate (WTI) was down 39 cents, or 0.61%, at $63.76 a barrel, while Brent crude eased 41 cents, or 0.6%, to $67.64. The modest pullback followed a more than 1% rise on Wednesday, wth both benchmarks on course for their biggest monthly loss since April.
The latest data from the EIA offered a mixed picture of the domestic oil market. Nationwide crude inventories fell by 2.4 million barrels in the week ending August 22, exceeding expectations for a 1.9 million-barrel draw. The decline was led by a rare drop in stockpiles at Cushing, Oklahoma—the delivery hub for U.S. crude futures—which fell for the first time in eight weeks.
The drawdown pointed to firm demand ahead of the U.S. Labor Day holiday weekend, which traditionally marks the final stretch of peak summer travel. Although now that the seasonal high point is passing, consumption is likely to cool in September and beyond.
Refinery runs were also reported to be lower across all U.S. regions, pulling nationwide throughput to its lowest level since early July. That raised questions about whether refiners will sustain current crude drawdowns in the coming weeks.
Alongside demand signals, traders are closely tracking Washington’s escalating pressure on India to halt imports of Russian crude. The White House this week doubled tariffs on Indian goods to 50%, part of a broader effort to dissuade New Delhi from continuing its energy trade with Moscow.
White House trade adviser Peter Navarro outlined exactly why those tariffs were implemented in a column for the Financial Times and suggested India is complicit in prolonging the Ukraine conflict by ‘giving Moscow the dollars it needs’.
Despite the sharp language and fresh tariffs, market watchers expect India to maintain Russian purchases, at least in the near term. “India is expected to continue buying Russian crude for now, which should limit the immediate impact of the tariffs on global supply,” said IG market analyst Tony Sycamore.
Still, the diplomatic standoff injects uncertainty into the global crude balance at a time when OPEC+ has already eased production curbs and non-OPEC producers have boosted output, raising fears of oversupply in the quarters ahead.
Oil markets also remain sensitive to the war in Ukraine, where Russia and Ukraine have escalated attacks on each other’s energy infrastructure. On Wednesday, Ukraine reported a massive overnight drone barrage that struck gas transport systems and power facilities across six regions, cutting electricity to more than 100,000 people.
Such attacks have supported crude prices this week, underlining the fragility of Europe’s energy supply chain and the possibility of further disruptions.
Beyond oil-specific drivers, sentiment in financial markets was fragile in early Thursday trade. Asian equities opened lower, weighed in part by disappointment over earnings from U.S. chipmaker Nvidia, which failed to live up to lofty investor expectations. The broader risk-off mood spilled into commodities, adding downward pressure on crude.
At the same time, hopes for looser monetary policy in the United States continue to provide a floor for prices. New York Federal Reserve President John Williams said on Wednesday that while interest rates will likely fall at some point, the Fed needs more data before deciding whether to cut at its September 16–17 meeting. A reduction in borrowing costs would be expected to boost economic activity and, in turn, oil demand.
With U.S. summer demand tapering, OPEC+ supply increasing, and geopolitical frictions flaring from Ukraine to India, oil traders face a volatile mix of drivers heading into September.
Crude futures remain trapped between strong near-term draws in U.S. stockpiles and the possibility of Federal Reserve rate cuts on one side and the looming seasonal slowdown in consumption, oversupply fears, and trade tensions on the other.
For now, the market appears caught in a holding pattern, with prices edging lower but awaiting clearer signals from demand trends, trade policy, and central bank decisions.
By Charles Kennedy for Oilprice.com
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