The oil market slid by about 1 per cent on Wednesday after remarks by the United States President, Mr Donald Trump, about progress in talks with Russia created uncertainty on whether the US would impose new sanctions.
Brent crude shrank by 75 cents or 1.1 per cent to settle at $66.89 per barrel and the US West Texas Intermediate (WTI) crude dropped 81 cents or 1.2 per cent to close at $64.35 a barrel.
President Trump said on Wednesday that his special envoy, Mr Steve Witkoff, made great progress in his meeting with the Russian President, Mr Vladimir Putin, as the US continued its preparations to impose secondary sanctions on Friday.
The American President has threatened additional sanctions on Russia if no moves are made to end the war in Ukraine, saying without further details that, “Everyone agrees this war must come to a close, and we will work towards that in the days and weeks to come.”
Russia is the world’s second-biggest producer of crude after the US, so any potential deal that would reduce sanctions would make it easier for Russia to export more oil.
This came after Mr Trump signed an executive order enacting an additional 25 per cent tariff on Indian goods, explicitly targeting India’s ongoing imports of Russian crude oil. This order increases the total tariff rate on Indian exports to the United States to 50 per cent, the highest level for any country under current US policy.
According to the executive order (effective 21 days after signing), duties will apply to goods entered for consumption or withdrawn from warehouses on or after that time.
Analysts warn the higher duties may further strain Indian exports, especially in labor-intensive sectors like textiles, gems, electronics, and petrochemicals.
In addition to the tariff and sanction uncertainty, analysts said a planned supply increase by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) has weighed on the market in recent days.
Crude oil inventories in the US decreased by 3.0 million barrels during the week ending August 1, according to new data from the US Energy Information Administration (EIA) released on Wednesday.
The build brings commercial stockpiles to 423.7 million barrels according to the official government data, which is 6 per cent below the five-year average for this time of year.
The EIA’s data release follows figures from the American Petroleum Institute (API) that were released a day earlier, which suggested that crude oil inventories shrank by 4.2 million barrels.