Global crude benchmarks remained stable on Wednesday after a sharp fall in the previous session, as markets tracked geopolitical tensions in Ukraine and the impact of steep US tariffs on Indian goods.
Brent crude futures slipped by 9 cents to $67.13 per barrel around 12 noon, while West Texas Intermediate (WTI) futures edged down 8 cents to $63.17. Both contracts had lost more than 2 per cent on Tuesday after starting the week at a two-week high, reported Reuters.
Geopolitical Uncertainty Keeps Market on Edge
Analysts say the ongoing uncertainty over the Ukraine conflict continues to dictate market sentiment. “(There is) a lot of uncertainty over how the Ukraine stalemate might be resolved, which portends volatility for crude but likely in a relatively small range,” said Vandana Hari, founder of oil market analysis firm Vanda Insights.
She noted that while some optimism around peace talks had eased earlier, the market is not ready to price in a significant supply risk premium.
On Tuesday, US special envoy Steve Witkoff said he would meet Ukrainian representatives in New York this week and confirmed that Washington was also holding discussions with Russia in an effort to end the war.
US Tariffs Target India Over Russian Oil
Adding to the volatility, the US administration has doubled tariffs on Indian goods to as much as 50 per cent, effective Wednesday. President Donald Trump said the move was linked to India’s increased purchases of Russian oil following Moscow’s invasion of Ukraine, which prompted Western sanctions and led to steep discounts on Russian cargoes.
Initially, Indian refiners scaled back Russian crude imports after the tariff announcements and amid tighter European Union sanctions on Nayara Energy, an Indian refinery partly owned by Russian interests.
However, state-run refiners such as Indian Oil and Bharat Petroleum have resumed buying Russian supplies for September and October. Indian Oil, the country’s largest refiner, stated it will continue purchases based on economic viability.
Will Higher Tariffs Curb Russian Oil Flows?
Experts remain sceptical about the effectiveness of secondary tariffs. “The secondary tariff has not been enough to stop India from buying Russian oil. The market will be watching Russian oil flows to India closely going forward to gauge the impact, if any, of secondary tariffs,” said Warren Patterson, head of commodity strategy at ING.
Since early 2022, India has saved an estimated $17 billion by sourcing discounted Russian crude. However, the Global Trade Research Initiative (GTRI) warned that additional US tariffs of up to 50 per cent could slash Indian exports by over 40 per cent – a loss amounting to nearly $37 billion in the current fiscal year.
Ukraine Strikes Disrupt Russian Refineries
The war’s impact extends beyond tariffs. Ukrainian drone attacks on Russian refineries have disrupted operations, forcing Russia to increase crude exports. Moscow has revised its August export plan from western ports upwards by 200,000 barrels per day following last week’s attacks, according to sources familiar with the matter.
With geopolitical tensions showing no sign of abating and trade frictions deepening, oil markets are expected to remain volatile in the near term.
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