Oil prices experienced an uptick in early trading on Wednesday, following a rise of over 3% in the prior session. This movement is attributed to growing concerns regarding potential supply shortages, particularly after U.S. President Donald Trump set a shortened timeline for Moscow to conclude the conflict in Ukraine. Brent crude futures increased by 14 cents, representing a 0.19% rise, reaching $72.65 per barrel as of 0048 GMT. Meanwhile, U.S. West Texas Intermediate crude saw a modest gain of 2 cents, or 0.03%, bringing its price to $69.23 per barrel.
Both contracts reached their peak levels since June 20 on Tuesday. On Tuesday, Trump announced that he would begin implementing measures against Russia, including 100% secondary tariffs on its trading partners, should there be no progress in ending the war within 10-12 days, thereby advancing an earlier 50-day deadline.
Implementing secondary tariffs at a rate of 100% would result in a significant transformation within the oil market. According to ING analysts, several major purchasers of Russian oil are expected to hesitate in maintaining their buying activities, especially among significant trading partners from the United States. “This scenario provides OPEC+ with the opportunity to begin the gradual reduction of further supply cuts; however, it would still result in a market deficit in a worst-case situation.”
The United States issued a warning to China, the foremost purchaser of Russian oil, indicating that substantial tariffs could be imposed if it persists in its purchasing activities, as stated by Treasury Secretary Scott Bessent during a news conference in Stockholm, where trade discussions with the EU were taking place. Analysts at JP Morgan indicated in a recent note that compliance with U.S. sanctions is unlikely from China, whereas India has expressed a willingness to adhere to them, which could jeopardize 2.3 million barrels per day of Russian oil exports.
The United States and the European Union successfully sidestepped a potential trade war through an agreement that entails a 15% tariff on European imports from the U.S. This development alleviates worries regarding the repercussions of trade tensions on economic growth and provides additional backing for oil prices. In Venezuela, foreign partners of the state oil company PDVSA continue to await authorizations from the U.S. to operate within the sanctioned nation following discussions on the matter last week. This development could lead to a return of some supply to the market, potentially alleviating upward pressure on prices.