Background on Key Figures and Context
On Wednesday, oil prices were on the rise after dipping to a five-week low the previous day. Traders focused on two main factors: U.S. President Donald Trump’s threats to impose higher tariffs on India for purchasing Russian oil and an unexpected increase in U.S. crude production.
At 5:19 a.m. CDMX time, Brent futures were up $1.11 (1.6%) at $68.75 per barrel, while West Texas Intermediate (WTI) in the U.S. gained $1.12 (1.7%) to reach $66.28 per barrel.
Recent Market Trends
Both contracts fell over $1 on Tuesday, hitting a five-week low and marking four consecutive sessions of losses.
Janiv Shah, an analyst at Rystad, commented: “Prices bounced back due to the potential higher tariffs on India, but the market is waiting for any formal implementation and to see which market elements will be affected.”
Trump’s Threats to India
Trump has renewed his threats of imposing higher tariffs on Indian imports due to the country’s purchase of Russian energy. India, along with China, is a significant buyer of Russian oil.
“Expectations seem to point towards India possibly reducing its Russian oil purchases, but I don’t see them completely stopping as they have been making abnormal profits by buying cheap Russian oil,” said Ashley Kelty, an analyst at Panmure Liberum.
U.S.-Russia Relations and Oil
Steve Witkoff, a U.S. envoy, arrived in Moscow on Wednesday for an eleventh-hour mission to seek progress in the Ukraine war, just two days before Trump’s deadline for Russia to accept peace or face new sanctions.
Support from U.S. Oil Inventory Data
The market also found support from the decline in U.S. oil inventories last week, according to analysts. The American Petroleum Institute reported a 4.2-million-barrel drop in reserves, compared to Reuters’ estimate of a 600,000-barrel reduction for the week ending August 1.
Key Actions and Ideas
- Oil prices fell to a five-week low the previous day, prompting a 1.6% and 1.7% rebound in Brent and WTI, respectively.
- Traders are focusing on Trump’s threats to impose higher tariffs on India for purchasing Russian oil.
- An unexpected increase in U.S. crude production is also supporting oil price growth.
- India, a significant buyer of Russian oil along with China, may reduce its Russian oil purchases due to Trump’s tariff threats.
- Steve Witkoff’s visit to Moscow aims to seek progress in the Ukraine war before Trump’s deadline for new sanctions.
- Declining U.S. oil inventories last week, as reported by the American Petroleum Institute, further supports the rise in oil prices.
Key Questions and Answers
- Q: Why are oil prices rising? A: Oil prices are rebounding due to Trump’s threats of higher tariffs on India for purchasing Russian oil, an unexpected increase in U.S. crude production, and declining U.S. oil inventories.
- Q: Who are the significant buyers of Russian oil? A: India and China are major buyers of Russian oil.
- Q: What is the purpose of Steve Witkoff’s visit to Moscow? A: The U.S. envoy is seeking progress in the Ukraine war before Trump’s deadline for new sanctions against Russia.
- Q: How do declining U.S. oil inventories impact oil prices? A: Declining U.S. oil inventories, as reported by the American Petroleum Institute, support the rise in oil prices.
