Morning Highlights: Oil jumps on tariff threats and surprise inventory draw after previous slide

Wednesday, August 6, 2025

Oil prices bounced back strongly Wednesday, rebounding from a 5 week low after investigations into U.S. and global demand signals as well as growing geopolitical tensions. Traders remain cautious, but near-term risks are seen skewed toward tighter supply.

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Market Snapshot (as of 6:15 EST):

• Brent (Oct): $68.66 (▲$1.02 / +1.5%)

• WTI (Sep): $66.18 (▲$1.02 / +1.6%)

Both benchmarks recovered sharply after Monday and Tuesday saw steep declines that brought contracts to five week lows.

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U.S. Threatens India Over Russian Crude; China Watching

President Trump renewed pressure on India, warning of possibly higher tariffs if the country continues to buy Russian oil, just as a 10 12 day deadline approaches. While China is expected to continue importing, a tilt away from Russian flows by India could tighten global balances.

"Oil prices are higher today as traders look to India and China's response to secondary sanctions," said Ashley Kelty of Panmure Liberum.

“India is highly incentivized to buy cheap Russian crude, though elevated geopolitical risk now clouds that logic.”

A U.S. envoy also visited Moscow this morning, reinforcing uncertainty surrounding the Russia Ukraine conflict and its possible impact on energy flows.

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Surprise U.S. Crude Draw Tightens Prompt Market

API data released Tuesday showed U.S. crude inventories fell by 4.2 million barrels last week—far exceeding expectations of a modest draw of 600,000 barrels. Despite weak product markets, gasoline and diesel inventories are rebounding seasonally.

“The API data showing a U.S. crude draw yesterday was price supportive,” noted UBS analyst Giovanni Staunovo.

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Russia Attacks Ukrainian Gas Infrastructure

Ukraine’s president confirmed a Russian strike on the Orlovka interconnector in southern Odesa, raising concerns over gas availability for winter heating.

Disruptions to gas flow create knock-on risks for electricity, LNG supplies, and geopolitical stability.

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Outlook: Prices Stay Firm, But Unresolved Risks Persist

• OPEC+ output plans are already fully priced in, with U.S. inventories and Russian supply risk now taking center stage.

• Oil remains range-bound, with traders watching how India, China, and global economic indicators respond to expanding sanctions regimes.

“Expect prices to remain supported until we see clarity on Russian oil export trajectories,” analysts at Roth Capital noted.