Oil prices climbed on Wednesday, recovering from a five-week low the previous day, as concerns about potential supply disruptions mounted following US president Donald Trump's threats of tariffs against India over its Russian crude purchases.
Brent crude futures gained 1.4% to trade at $68.59 per barrel at the time of writing, while West Texas Intermediate futures rose by 1.5% to $66.13 a barrel.
“There's still plenty of uncertainty over the US imposing secondary tariffs on buyers of Russian oil … market chatter is growing that China's purchases of Russian oil may come into focus next,” ING commodity strategists said.
“If India were to stop buying Russian oil amid tariff threats, we believe the market would be able to cope with the loss of this supply,” they said, adding that the bigger risk was if other buyers also started to shun Russian oil.
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The Trump administration's pressure on India to halt its Russian oil purchases is part of a broader effort by Washington to economically pressure Moscow into pursuing peace in Ukraine. On Tuesday, Trump warned that tariffs on Indian goods could be imposed within 24 hours if New Delhi does not comply. He also suggested that falling energy revenues might eventually force Russian president Vladimir Putin to end the war.
India responded by calling the threat “unjustified” and reaffirmed its commitment to protecting its economic interests.
Yuki Takashima, an economist at Nomura Securities, said investors are closely watching whether India will reduce its Russian oil purchases in response to the tariff threats. If it maintains its current levels of imports, Takashima suggested that WTI prices could remain in the $60-$70 range for the rest of the month.
Gold prices edged lower but remained near a two-week high, as investors continued to seek defensive assets in light of growing expectations of a more dovish stance from the Federal Reserve.
At the time of writing, gold futures were down 0.4% to $3,411.60 per ounce, while spot gold remained relatively flat at $3,366.95 per ounce.
The previous day’s release of US ISM data revealed that the services sector business activity index for July fell to 50.1 points, below forecasts. The data suggested sluggish growth, slowing employment, and rising price pressures.
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These figures have fuelled speculation that the Federal Reserve could cut interest rates as early as September, with markets now pricing in a 90% probability of such a move.
