Oil Sheds 2% As U.S. Tensions With Russia, India Escalate

India's tariffs are set to double to 50% starting tomorrow: File Image/Pixabay

After four consecutive sessions of gains, risk aversion reasserted itself and caused oil on Tuesday to shed more than 2 percent, with the very same elements that caused the gains – Russia/Ukraine and tariffs – said to have driven the losses.

Brent settled down $1.58, or 2.3 percent, at $67.22 per barrel, and West Texas Intermediate settled down $1.55, or about 2.4 percent, to $63.25.

The settlements occurred after three people familiar with the matter told media that Russia had revised up its crude oil export plan from western ports by 200,000 barrels per day (bpd) this month, after drone attacks from Ukraine disrupted refinery operations and freed up more crude for shipment.

Analytical focus was also directed at India, whose tariffs imposed by the U.S. are set to double to 50 percent starting Wednesday, for continuing to purchase oil from Russia; also, U.S. president Donald Trump reiterated that he would impose further sanctions on the former Soviet Union if there was no progress in peace talks with Ukraine in the next two weeks.

Tamas Varga, an analyst with PVM Oil Associates, said, "Given the huge amount of uncertainties in the oil market caused by the Ukrainian conflict and the tariff war, investors will remain unwilling to commit themselves to either direction on a prolonged basis."

According to Bloomberg, Indian refiners plan to trim their purchases of Russian crude in the coming weeks, but it's unclear if a slight reduction will persuade the Trump administration to reduce its levies; and while analysts fear Washington's strategy could push India closer to Russia, a White House official told media that "They don't think this is necessarily the end of the relationship between the two countries."

In other Tuesday oil news that may sway short-term trading, the American Petroleum Institute estimated that U.S. crude inventories dropped by 974,000 barrels in the week ending August 15; gasoline inventories fell by 2 million barrels in the week ending August 22, and as of last week these inventories were 1 percent below the five-year average for this time of year.