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.
Should India stop buying US LNG?: Former diplomat slams US over oil hypocrisy, Pakistan ties
Former Indian Foreign Secretary Kanwal Sibal fired back at U.S. criticism over Russian oil purchases, accusing Washington of hypocrisy in global trade and foreign policy, while questioning its support for Pakistan and growing ties with China. In a pointed post on X, Sibal responded to Republican Congressman Don Bacon’s call for India to “pay out the nose” for buying Russian energy. Bacon claimed that “the largest democracy in the world should stand with Ukraine.” Sibal didn’t hold back. “Since the US has invaded so many countries should India stop buying US LNG, amongst other things?” he asked. He then blasted America’s record of backing “a terror sponsoring Islamist state like Pakistan” and criticized Trump’s new push for investment in Pakistan’s “massive oil reserves.” The former diplomat also took aim at America’s deepening trade ties with China. “What is the explanation for the world’s oldest democracy building its biggest trade partnership with a communist dictatorship like China instead of India?” he asked. “Some introspection would be helpful.” Sibal’s comments come as U.S.-India tensions rise over New Delhi’s ongoing purchases of discounted Russian crude. Prime Minister Narendra Modi, facing 25% tariffs imposed by the Trump administration, recently called for bolstering domestic production and signaled that India will continue prioritizing energy security over geopolitical pressure.
IOC buys seven million barrels of U.S., West Asia crude after Russian oil pause
Indian Oil Corporation (IOC), the country’s top refiner, has bought seven million barrels of September-arrival crude from the United States, Canada and West Asia via a tender, several trade sources said on Monday (August 4, 2025). IOC’s large spot crude purchase comes after the arbitrage window for U.S. crude to Asia opened and as Indian state refiners paused buying of Russian crude oil on narrowing discounts. U.S. President Donald Trump has warned countries not to purchase oil from Moscow, which is under sanctions over its February 2022 full-scale invasion of Ukraine. IOC bought 4.5 million barrels of U.S. crude, 5,00,000 barrels of Canada’s Western Canadian Select (WCS) and two million barrels of Das oil produced in Abu Dhabi, the sources said. They declined to be named because they were not authorised to speak to the media. The higher-than-normal purchases are partly to replace Russian barrels, two of the sources said. India, the world’s third-largest oil importer, is the biggest buyer of seaborne Russian crude. Indian state refiners — IOC, Hindustan Petroleum Corp, Bharat Petroleum Corp and Mangalore Refinery Petrochemical Ltd — had not sought Russian crude in the past week or so, Reuters reported last week.
BP makes its biggest oil and gas discovery in 25 years
Bp has hailed its biggest discovery in over a quarter of a century as the oil giant renews its focus on fossil fuels. The FTSE 100 group revealed the find after drilling a well off the coast of Brazil, in the Bumerangue oil field, just over 400 kilometres offshore from Rio de Janeiro, spanning more than 300 square kilometres. It said the discovery was its tenth to date in 2025 and estimated to be its largest since the discovery of Shah Deniz gas field in the Caspian Sea in 1999. Gordon Birrell, BP’s executive vice president for production and operations said: “We are excited to announce this significant discovery at Bumerangue, BP’s largest in 25 years. “This is another success in what has been an exceptional year so far for our exploration team, underscoring our commitment to growing our upstream. “Brazil is an important country for BP and our ambition is to explore the potential of establishing a material and advantaged production hub in the country.” Shares in the group lifted around 1.5% higher in Monday trading after the announcement. It comes ahead of half-year results on Tuesday, which are expected to show a big fall in BP’s second quarter earnings. BP – like its rival Shell and other peers – has shifted away from net zero ambitions to focus on extracting more oil and gas, following pressure from some investors to boost its profits.
Baloch leader warns Trump over oil and gas exploration in Balochistan, asserts region’s sovereignty
In a dramatic development, Balochistan leader Mir Yar Baloch has issued a stern warning to US President Donald Trump regarding his interest in establishing a massive oil and natural gas plant in Pakistan. In a post on his official X (formerly Twitter) account, Baloch cautioned Trump against stepping into any natural resource exploration in the region, claiming that resources like oil, gas, lithium, and uranium belong to Balochistan, not Pakistan. Balochistan’s natural resources: A source of conflict Mir Yar Baloch pointed out that while Trump’s evaluation of the region’s vast oil and mineral resources was accurate, his government had been misled about the geographical ownership of these resources. Baloch asserted that the Pakistani military leadership, particularly General Asim Munir and his diplomatic channels, had intentionally misinformed the US about the true ownership of the resources. According to Baloch, the reserves of oil, natural gas, copper, lithium, uranium, and rare earth minerals are not in Pakistan’s Punjab region, but are located in Balochistan—a historically sovereign nation currently under illegal occupation by Pakistan. He went on to claim that General Munir’s assertion that these resources belong to Pakistan was not only false but was a deliberate attempt to seize Balochistan’s wealth for political and economic gain. Mir Yar Baloch accused the Pakistani military leadership, particularly General Asim Munir and Islamabad’s diplomatic channels, of deliberate misrepresentation to US officials. He warned that President Trump had been “gravely misled” about the geography and sovereignty of these critical resources, describing Pakistan’s claim as “false… a deliberate attempt to misappropriate Balochistan’s wealth for political and financial gain”.
U.S. penalty risk on Russian oil may add $9-11 billion to India’s import bill, analyst say
India’s annual oil import bill could rise by $9-11 billion if the country is compelled to move away from Russian crude in response to U.S. threats of additional tariffs or penalties on Indian exports, analysts said. India, the world’s third-largest oil consumer and importer, has reaped significant benefits by swiftly substituting market-priced oil with discounted Russian crude following Western sanctions on Moscow after its invasion of Ukraine in February 2022. Russian oil, which accounted for less than 0.2% of India’s imports before the war, now makes up 35-40% of the country’s crude intake, helping reduce overall energy import costs, keep retail fuel prices in check, and contain inflation. The influx of discounted Russian crude also enabled India to refine the oil and export petroleum products, including to countries that have imposed sanctions on direct imports from Russia. The twin strategy of Indian oil companies is posting record profits. This is, however, now under threat after U.S. President Donald Trump announced a 25% tariff on Indian goods plus an unspecified penalty for buying Russian oil and weapons. The 25% tariff has since been notified, but the penalty is yet to be specified. Coming within days of the European Union banning imports of refined products derived from Russian-origin crude, this presents a double whammy for Indian refiners. Sumit Ritolia, Lead Research Analyst (Refining & Modelling) at global real-time data and analytics provider Kpler, termed this as “a squeeze from both ends”. EU sanctions — effective from January 2026 — may force Indian refiners to segment crude intake on one side, and on the other, the U.S. tariff threat raises the possibility of secondary sanctions that would directly hit the shipping, insurance, and financing lifelines underpinning India’s Russian oil trade. “Together, these measures sharply curtail India’s crude procurement flexibility, raise compliance risk, and introduce significant cost uncertainty,” he said.
HPCL signs 10-year LNG supply deal with Abu Dhabi’s ALNG
Hindustan Petroleum Corporation Limited (HPCL) has entered into a strategic agreement with Abu Dhabi Gas Liquefaction Company (ALNG), a subsidiary of ADNOC Gas, for the long-term supply of Liquefied Natural Gas (LNG) over a 10-year period. The agreement, signed under a Heads of Agreement (HOA), marks a major step in bolstering India’s energy security and advancing HPCL’s clean energy goals. As per the agreement, HPCL will receive LNG at the newly commissioned Chhara LNG Terminal in Gujarat. The imported LNG will be used to meet the fuel requirements of HPCL’s refineries, its City Gas Distribution (CGD) network, and for supplying to downstream customers. ALNG, part of ADNOC Gas, is a globally recognized integrated gas processing and sales company. This collaboration highlights the strengthening energy partnership between India and the UAE, while also supporting India’s broader transition toward cleaner fuels. This 10-year LNG procurement deal is expected to play a key role in meeting India’s growing energy demands while reducing reliance on more carbon-intensive fuels. It reinforces HPCL’s long-term commitment to sustainability and a greener energy future.