Oil Prices Rebound Amid U.S. Tariff Hike and Crude Supply Dip

Oil markets recovered slightly on Wednesday, gaining about 1% after sliding to a five-week low in the previous session.

This bounce followed news of higher tariffs imposed by U.S. President Donald Trump on Indian imports due to its oil trade with Russia, coupled with a significant drawdown in U.S. crude inventories.

Brent crude futures were up by 80 cents (1.2%) to reach $68.44 per barrel, while U.S. West Texas Intermediate (WTI) also rose by the same margin, trading at $65.96 on Wednesday afternoon.

The rebound followed a four-day losing streak, with Brent closing on Tuesday at its weakest level since July 1.

“Prices bounced up on the potential higher tariffs on India, but the market is waiting for some sort of a formal implementation as well as which elements in the market are to be affected,” Reuters quoted Rystad analyst Janiv Shah.

President Trump signed an executive order imposing a 25% tariff on Indian goods, citing the country’s continued importation of Russian crude. India and China remain major buyers of Russian oil, despite global pressure.

Interestingly, this development came shortly after a Kremlin official noted that U.S. envoy Steve Witkoff had held “useful and constructive” discussions with President Vladimir Putin ahead of an impending peace talks deadline over the war in Ukraine.

Russia remains the second-largest oil producer globally, behind the U.S., based on federal energy figures for 2024.

“Expectations appear that India may reduce its buying of Russian crude, but I can’t see them doing so entirely as they have been making supernormal profits on buying cheap Russian crude,” said Ashley Kelty, an analyst at Panmure Liberum.

Shah also noted that an anticipated production boost from the OPEC+ alliance, which includes Russia and other key exporters, could offset any supply shortfalls if India cuts back on its Russian crude purchases.

In a separate diplomatic move, Indian Prime Minister Narendra Modi is expected to visit China for the first time in over seven years, signalling a shift in geopolitical dynamics as India’s ties with the U.S. appear to cool.

The oil market also drew support from inventory data. According to the U.S. Energy Information Administration (EIA), domestic crude stocks fell by 3.0 million barrels in the week ending August 1 — far exceeding analyst expectations of a 0.6 million barrel draw, although less than the 4.2 million barrels indicated by the American Petroleum Institute’s earlier report.