Oil prices slipped on Thursday as markets assessed weakening prospects for US fuel demand with the summer driving season nearing its close, while also considering the potential consequences of India’s struggle with steep American tariffs on Russian crude imports.
Brent crude futures were down 31 cents, or 0.46 per cent, at $67.74 by early morning. West Texas Intermediate (WTI) crude futures also lost ground, dropping 36 cents, or 0.56 per cent, to $63.79, reported Reuters. The retreat followed a more than 1 per cent rise in the previous session.
US Stockpile Drop Signals Strong Demand
Fresh data from the US Energy Information Administration (EIA) on Wednesday revealed that domestic crude inventories fell by 2.4 million barrels in the week ending August 22. Analysts polled by Reuters had expected a draw of around 1.9 million barrels. The larger-than-anticipated decline suggested solid demand ahead of the US Labour Day holiday weekend.
However, analysts caution that this period typically signals the end of the peak summer driving season in America, often followed by weaker consumption trends. “This typically marks the unofficial end of the summer driving season and the onset of lower US demand,” said IG market analyst Tony Sycamore.
From a technical standpoint, Sycamore noted that crude is facing resistance in the $64-$65 range, while support levels could be tested closer to $60.
Spotlight on India’s Oil Purchases
At the same time, traders are closely monitoring how India, the world’s third-largest oil importer, navigates growing pressure from Washington to reduce purchases of Russian crude. On Wednesday, US President Donald Trump announced that tariffs on imports from India would be doubled to as much as 50 per cent, heightening concerns of a brewing supply dilemma.
“India is expected to continue purchasing crude oil from Russia at least in the short term, which should limit the impact of the new tariffs on global supply,” Sycamore added.
Russia-Ukraine Conflict Adds to Market Tensions
Geopolitical risks also continue to underpin oil price movements. Russia and Ukraine have intensified their strikes on each other’s energy infrastructure. Ukrainian officials reported that Moscow carried out a large-scale drone attack overnight across six regions, targeting energy and gas transport facilities. The assault left more than 100,000 people without electricity.
Rate Cut Hopes Provide Some Support
Beyond supply and demand fundamentals, macroeconomic developments are offering partial support to oil markets. Expectations of a possible interest rate cut by the US Federal Reserve have buoyed sentiment, with lower borrowing costs seen as a potential boost to economic activity and, by extension, fuel consumption.
New York Federal Reserve President John Williams stated on Wednesday that while rates are likely to come down at some point, policymakers remain cautious and will rely on incoming data before making a decision at the Fed’s September 16-17 meeting.
