Oil Prices Inch Higher as Trump’s Trade Threats Counter Oversupply Fears
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.
Indian refiners to continue paying for Russian oil in dirhams
Despite new European Union (EU) sanctions and warnings from the United States, state-run Indian oil companies are expected to continue purchasing Russian crude using dirhams for payment, according to officials cited by Moneycontrol. On 18 July, the EU lowered the price cap for Russian oil to $47.6 per barrel, down from the previous $60, as part of its 18th package of sanctions related to the ongoing conflict in Ukraine. Indian officials stated that these measures do not currently affect India’s procurement of Russian oil due to transactions routed through traders based in the United Arab Emirates (UAE). A senior refinery executive told Moneycontrol, “EU sanctions would not have a direct impact as of now because we are buying through UAE traders.” Impact of US tariff threats and payment shifts On July 30, US President Donald Trump announced increased tariffs on India and alluded to further penalties related to New Delhi’s defence and energy trade with Moscow. He reiterated these warnings on 4 August, stating on Truth Social that India profits from reselling Russian oil and criticised its stance on the Ukraine conflict. Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) are among the refiners involved. One executive confirmed, “We were not making dollar payments even with a $60 price cap… Russian oil purchase is done through UAE traders in AED.” Another government official stated that Indian refiners are not currently exploring alternative currencies for these transactions and that no progress has been made on rupee-rouble settlement mechanisms. Rising reliance and market trends India’s share of Russian crude imports rose sharply from 0.2 percent before the war in Ukraine to around 35–40 percent of total crude imports. Petroleum Minister Hardeep Singh Puri indicated in July that India could revert to earlier sourcing practices if secondary sanctions are imposed. Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) are among the refiners involved. One executive confirmed, “We were not making dollar payments even with a $60 price cap… Russian oil purchase is done through UAE traders in AED.” Another government official stated that Indian refiners are not currently exploring alternative currencies for these transactions and that no progress has been made on rupee-rouble settlement mechanisms. Rising reliance and market trends India’s share of Russian crude imports rose sharply from 0.2 percent before the war in Ukraine to around 35–40 percent of total crude imports. Petroleum Minister Hardeep Singh Puri indicated in July that India could revert to earlier sourcing practices if secondary sanctions are imposed.
Why the government wants to blend more ethanol with petroleum products?
The Ministry of Petroleum and Natural Gas has issued a clarification saying concerns around 20% ethanol-blended petrol (E20) harming engines or reducing performance are “largely unfounded and not supported by scientific evidence.” However, why does the government want to blend more ethanol with petrol in the first place? This is because India’s fuel policy is undergoing a shift. Petrol at pumps across the country now contains more ethanol than ever before, not as a climate gesture, but as a strategic recalibration of how India manages its energy security, rural economy, and urban environment. By March 2025, the government hit its “E20 blending target 20% ethanol in petrol” five years ahead of schedule. Average blending levels stood at 17.98% in February 2025, up from 14.6% the year before, according to official data. The next target, already in sight, is a 30% blend (E30) by 2030. Behind the push lies a strategic policy bet that domestic ethanol can help India cut costly crude oil imports, reduce greenhouse gas emissions, and build a parallel income stream for farmers. ECONOMICS OF ETHANOL India imports more than 85% of its crude oil, making it vulnerable to global supply shocks and dollar volatility. By substituting a portion of petrol with ethanol, a domestically produced biofuel, the government is looking to blunt the impact of these external risks. Since 2014, the ethanol blending programme (EBP) has helped India save over Rs 1360 billion in foreign exchange and replace nearly 19.3 million tonnes of crude oil, according to the Ministry of Petroleum and Natural Gas.
Oil Edges Down as Traders Weigh Trump’s Latest India Threat
Oil extended a three-day drop, as investors weighed risks to Russian supplies, with US President Donald Trump stepping up a threat to penalize India for buying Moscow’s crude. Brent traded near $68 a barrel after shedding more than 6% over the previous three sessions, while West Texas Intermediate was just shy of $66. Trump said he would be “substantially raising” the tariff on Indian exports to the US over the nation’s purchases of Russian oil as part of a bid to force Moscow to agree a truce in Ukraine. New Delhi slammed the move as unjustified. Oil has been on a round trip, rising a few dollars above $70 and then falling back, as traders try to gauge whether Trump will follow through on his threats to punish Russian oil buyers. Crude prices have held up in recent months in part because inventory builds haven’t appeared near vital pricing points and instead have been concentrated on China.