Oil prices firmed further yesterday, driven by a shortened deadline for Russia to come to a peace deal with Ukraine and threats of secondary tariffs on countries importing Russian Oil. ICE Brent settled a little more than 1% higher on the day, taking total gains so far this week to around 7%, ING's commodity experts Ewa Manthey and Warren Patterson note.

Buyers potentially look for alternative crude Oil from the Middle East

"These concerns only grew yesterday as President Trump threatened that India would be penalised for importing Russian energy. This comes on top of the 25% tariff that the US is set to impose from 1 August on imports from India. The US and India have struggled to come to a trade deal before Friday’s deadline. It’s still unclear how big a penalty India faces (the original threat was for a secondary tariff of 100%)."

"This is causing plenty of uncertainty for Indian refiners, as well as the broader market, as to whether they can continue to import Russian Oil. We’ve already seen the Brent-Dubai spread moving into deeper discount recently. These developments are likely to put further downward pressure on the spread, as buyers potentially look for alternative crude Oil from the Middle East."

"Weekly data from the Energy Information Administration was fairly bearish. US crude Oil inventories increased by 7.7m barrels over the last week. This was driven by weaker crude Oil exports, which declined by 1.16m b/d week on week to the second lowest level since August 2023. For refined products, gasoline inventories fell by 2.72m barrels, while distillate fuel stocks increased by 3.64m barrels. This will help ease concerns over tightness in the middle distillate market with stocks now above levels seen at the same stage in 2022. Overall, the release was negative for the market, with total crude and product stocks rising to their highest levels since October 2024."