Global Oil Market Shaken by U.S.-India Trade Tensions and Ukraine Conflict Uncertainty

The global oil market is experiencing heightened volatility, driven by diplomatic tensions and geopolitical uncertainty. Crude prices are on track for their most substantial weekly rise since early July, with Brent crude holding above $67 per barrel. This is largely influenced by rising concerns over Russian crude supplies as the U.S. pressures India to stop its purchases. Despite the threats of a 50% tariff increase on Indian goods, Indian refiners have resumed buying Russian oil, while a Moscow official expects supply to continue.

Oil prices are also being influenced by fading hopes for a swift resolution to the Ukraine conflict. The ongoing hostilities and the prospect of more severe U.S. sanctions on Russia have contributed to rising risk premiums. Bullish sentiment was also supported by a larger-than-expected drawdown in U.S. crude stocks. According to the U.S. Energy Information Administration, crude inventories fell by 6 million barrels in the week ending August 15, far exceeding analyst forecasts. While this suggests strong demand, analysts from Morgan Stanley forecast that the oil market is heading for an unusually large surplus in the coming quarters, which could put downward pressure on prices.