[HOUSTON] Oil prices settled higher on Wednesday (Aug 27) after data showed a larger-than-expected drop in US crude inventories and as investors weighed the potential impact from new US tariffs on India.
Brent crude futures were up 83 US cents, or 1.2 per cent, at US$68.05 a barrel. West Texas Intermediate crude futures gained 90 US cents, or 1.4 per cent, to US$64.15. Both contracts fell by more than 2 per cent on Tuesday.
US crude inventories dropped by 2.4 million barrels to 418.3 million barrels last week, the Energy Information Administration (EIA) said, compared with analysts’ expectations in a Reuters poll for a 1.9-million-barrel draw.
US petrol stocks fell by 1.2 million barrels compared with expectations for a 2.2 million-barrel draw. Distillate stockpiles, which include diesel and heating oil, fell by 1.8 million barrels versus expectations for an 885,000-barrel rise, the EIA data showed.
“The petrol demand number is supportive and shows people are getting ready to travel over the Labour Day weekend. This is the crescendo of the summer driving season, also the last big hurrah for the summertime petrol blend,” said Phil Flynn, senior analyst with Price Futures Group.
US President Donald Trump’s doubling of tariffs on imports from India to as much as 50 per cent was also in focus. The tariffs in response to India’s purchases of Russian oil took effect on Wednesday.
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There was no sign of supply disruption so far, but uncertainty over whether the US will target the oil flows is deterring some traders from taking new positions, said UBS analyst Giovanni Staunovo.
While the immediate impact of US tariffs on Indian exports appears limited, the ripple effects on the economy pose challenges that must be addressed, India’s Finance Ministry said in its July monthly economic review, released on Wednesday.
Russia and Ukraine have also stepped up attacks on each other’s energy infrastructure, worrying traders about supply disruptions.
Russia launched a massive drone attack on energy and gas transport infrastructure across six Ukrainian regions overnight, Ukrainian officials said on Wednesday. Ukraine struck Russian oil refineries and exporting infrastructure in recent days.
US special envoy Steve Witkoff said on Tuesday that he will meet Ukrainian representatives in New York this week and that Washington is also in talks with Russia in an effort to end the war.
Russia has made an upward revision to its crude oil export plan from western ports by 200,000 barrels per day in August from the initial schedule after attacks on its refineries last week, three people close to the matter said on Tuesday.
New York Federal Reserve Bank president John Williams said on Wednesday that interest rates will likely fall at some point but policymakers will need to see what upcoming data indicate about the economy before deciding whether it is appropriate to make a cut at the Sep 16 to 17 meeting.
Lower interest rates can reduce consumer borrowing costs and boost economic growth and demand for oil. REUTERS
