U.S. Crude Oil Prices Surge Due to Decreased Inventory Levels and Sanctions Imposed on India

Rising tensions between Russia and Ukraine have sent shockwaves through the global crude oil market. The conflict, which has been ongoing for over three years, has seen a recent escalation, with an overnight aerial attack by Russia resulting in the death of nearly 18 people in Ukraine.

This heightened conflict has contributed to a surge in crude oil prices. The WTI Crude oil for October delivery is currently trading up by $0.42 (or 0.65%) at $64.57 per barrel. The increase in prices is not only due to the Russia-Ukraine conflict but also due to concerns over the OPEC alliance's oversupply and the production boost by OPEC+ nations.

The OPEC+ nations, including Russia, have eased production restrictions and are increasing production in September by 547,000 barrels per day. However, these efforts to boost supply have been countered by non-OPEC producers, who have also increased their output, raising concerns of oversupply in the near term.

The US Fed's policy direction could also impact the US dollar and, by extension, the crude oil market. Trade tensions, geopolitical conflicts, and the US dollar-denominated nature of crude oil could influence the US Fed's decision on interest rates. Traders are now looking forward to the September 16-17 meeting decision by the US Fed on interest rates.

Tomorrow's data on the US PCE price index, the Fed's preferred measure of inflation, could provide more insight into the central bank's policy direction. The upcoming US Labor Day weekend is predicted to mark the beginning of low gas demand in the US, which could potentially ease pressure on crude oil prices.

The stand-off between the US and India on India's purchase of Russian oil continues. India buys 36% of its 1.8 million barrels per day of crude oil imports from Russia. To dissuade India from buying Russian oil, the US has slapped 25% "penalty tariffs" on top of previous 25% trade tariffs on India.

In response, India is exploring alternative oil suppliers such as Russia, but due to US sanctions and tariffs, it may look into other sources to circumvent them. The focus is on India potentially reducing Russian oil imports to avoid secondary US sanctions while maintaining its energy needs and market stability.

Despite the US's diplomatic efforts to end the Russia-Ukraine war, these efforts have so far been unproductive. Russia has pushed back on the idea of a summit between the presidents of Russia and Ukraine for peace talks. The ongoing conflict and the geopolitical tensions it creates continue to pose a significant challenge to global crude oil prices.

U.S. Crude Oil Prices Surge Due to Decreased Inventory Levels and Sanctions Imposed on India