Oil Prices Climb as Trump Targets Indian Imports with Tariffs

Oil prices increased in early trading on Thursday as geopolitical tensions escalated following a new executive order from President Donald Trump. This order imposes tariffs on Indian imports, primarily targeting India’s continued purchases of Russian oil. As a result, prices for crude oil have seen a modest rebound after a week marked by declines due to rising OPEC+ output and concerns over global demand.

Brent crude futures for October delivery rose by 0.88%, reaching $67.48 per barrel, while West Texas Intermediate futures climbed 0.98% to $64.98. The upward movement in prices was partly fueled by uncertainty in the market stemming from Trump’s announcement that tariffs on Indian imports will increase to a cumulative 50%, effective August 28.

India stands as the world’s third-largest oil importer, and its reliance on discounted Russian crude has faced criticism from Washington. This latest tariff action against India coincides with renewed warnings directed at China, another significant buyer of Russian oil. These tariff measures are integral to a broader U.S. strategy aimed at exerting pressure on Moscow as the conflict in Ukraine continues. In a recent statement, Trump mentioned a “good prospect” of a summit with both Russian President Vladimir Putin and Ukrainian President Volodymyr Zelensky.

Despite the increase in tariffs, analysts at ANZ noted that the three-week delay before implementation offers a window for potential negotiations. This might soften the tariffs’ impact, but the possibility of disrupted trade routes and shifts in global oil flows has nonetheless created a more bullish sentiment in the market. If India and China are compelled to reduce their Russian oil purchases, they may seek alternative suppliers, tightening global supply and potentially raising prices further.

Another contributing factor to Thursday’s price recovery was a significant drop in U.S. crude inventories. According to the Energy Information Administration (EIA), crude stockpiles fell by 3 million barrels, significantly surpassing analysts’ expectations of a 200,000-barrel increase. This unexpected drawdown indicates either stronger demand or tighter domestic supply in the U.S., helping to counteract some of the prevailing bearish sentiments in the market.

Despite the day’s gains, the long-term outlook for oil prices appears largely unchanged. Prices remain significantly lower than they were just a week ago, impacted by signs of weakening global demand and increased production from OPEC+ members. The alliance, which includes both Russia and Saudi Arabia, recently announced plans to boost output in September, a move that contradicts the current soft pricing environment. This decision reflects member states’ need for fiscal revenue after months of disappointing oil receipts.

Furthermore, recent economic indicators from both the United States and China suggest a potentially stagnant or even contracting energy demand in the upcoming months. China, in particular, has reported lackluster industrial activity and weak consumer sentiment, raising doubts about its future role as a major driver of oil demand.

The surge in tariff-driven volatility under Trump’s administration adds a new layer of uncertainty for traders, who now face the dual challenges of navigating trade policy changes alongside production adjustments. As the market grapples with these complexities, the future trajectory of oil prices remains uncertain.