Undercurrents surge! What's behind the two consecutive oil price increases?
2025-10-22 21:48:18
On Wednesday (October 22), international oil prices rose for a second consecutive trading day, increasing by over 2%, driven by optimistic expectations for progress in the US-India trade agreement. Oil prices rebounded from a five-month low on Monday, having come under significant pressure earlier this week due to concerns about oversupply and expectations of weak demand.
Mitsubishi UFJ Financial Group analyst Kim Soo-jin pointed out that market reports show that the United States and India are close to finalizing a trade agreement, and India may gradually reduce its imports of Russian crude oil, which will boost demand for other grades of crude oil and become the core driver of rising oil prices.
The United States and India have been engaged in difficult trade negotiations for months, with the Trump administration's core demand being to narrow its huge trade deficit with Asia's second-largest economy.
During this period, Trump explicitly listed India as a target for punishment. The core reason was that India purchased a large amount of Russian crude oil, providing energy revenue support for the Kremlin.
Trump has doubled tariffs on India from 25% to 50% since August to punish it for its continued purchases of Russian oil.
India's Mint newspaper reported on Wednesday, citing three anonymous sources, that the United States and India are close to reaching a long-stalled trade agreement. The core content of the agreement includes a significant reduction in U.S. tariffs on Indian imports from 50% to a range of 15% to 16%.
In exchange, India may agree to gradually reduce its Russian oil imports. The potential agreement could be formally announced as early as next week at the ASEAN summit in Malaysia, which has caused market concerns about crude oil supply.
Geopolitical tensions further amplify risks on the crude oil supply side, disrupting oil price trends.
A planned summit between U.S. President Donald Trump and Russian President Vladimir Putin was reportedly postponed, while traders also reacted to news that the West was pressuring Asian buyers to reduce purchases of Russian oil, a development that heightened market concerns about potential supply disruptions.
In addition to trade and geopolitical factors, news that U.S. crude oil inventories may decline and the Department of Energy's plan to replenish strategic petroleum reserves also boosted oil prices.
Citing data from the American Petroleum Institute (API) on Tuesday, market sources reported that U.S. crude oil, gasoline, and distillate inventories all declined last week. Meanwhile, the U.S. Department of Energy announced plans on Tuesday to purchase 1 million barrels of crude oil to replenish the Strategic Petroleum Reserve (SPR), a move aimed at optimizing reserves while taking advantage of relatively low oil prices.
Oil prices rose steadily in early trading on Wednesday, supported by easing supply concerns and optimism about trade negotiations; market sentiment further improved after the announcement that the United States plans to replenish its strategic petroleum reserves.
The trend of the December U.S. crude oil futures contract is consistent with what was written in the previous article. After falling to the lower edge of the box, the oil price began to rebound. It has now rebounded to near the middle track, following the same trend from April to June. If the oil price subsequently stands above 58.48, it is expected to continue to rebound.
(Daily chart of the December crude oil futures contract, source: Yihuitong)
At 21:45 Beijing time, the December futures contract of US crude oil was trading at 58.68/69.
Optimistic expectations for trade negotiations are the main reason for the rise in oil prices
Mitsubishi UFJ Financial Group analyst Kim Soo-jin pointed out that market reports show that the United States and India are close to finalizing a trade agreement, and India may gradually reduce its imports of Russian crude oil, which will boost demand for other grades of crude oil and become the core driver of rising oil prices.
The United States and India have been engaged in difficult trade negotiations for months, with the Trump administration's core demand being to narrow its huge trade deficit with Asia's second-largest economy.
During this period, Trump explicitly listed India as a target for punishment. The core reason was that India purchased a large amount of Russian crude oil, providing energy revenue support for the Kremlin.
Trump has doubled tariffs on India from 25% to 50% since August to punish it for its continued purchases of Russian oil.
India's Mint newspaper reported on Wednesday, citing three anonymous sources, that the United States and India are close to reaching a long-stalled trade agreement. The core content of the agreement includes a significant reduction in U.S. tariffs on Indian imports from 50% to a range of 15% to 16%.
In exchange, India may agree to gradually reduce its Russian oil imports. The potential agreement could be formally announced as early as next week at the ASEAN summit in Malaysia, which has caused market concerns about crude oil supply.
The postponement of the Russia-US summit may exacerbate supply-side concerns
Geopolitical tensions further amplify risks on the crude oil supply side, disrupting oil price trends.
A planned summit between U.S. President Donald Trump and Russian President Vladimir Putin was reportedly postponed, while traders also reacted to news that the West was pressuring Asian buyers to reduce purchases of Russian oil, a development that heightened market concerns about potential supply disruptions.
US inventory decline + strategic reserve replenishment boosted market sentiment
In addition to trade and geopolitical factors, news that U.S. crude oil inventories may decline and the Department of Energy's plan to replenish strategic petroleum reserves also boosted oil prices.
Citing data from the American Petroleum Institute (API) on Tuesday, market sources reported that U.S. crude oil, gasoline, and distillate inventories all declined last week. Meanwhile, the U.S. Department of Energy announced plans on Tuesday to purchase 1 million barrels of crude oil to replenish the Strategic Petroleum Reserve (SPR), a move aimed at optimizing reserves while taking advantage of relatively low oil prices.
Oil prices rose steadily in early trading on Wednesday, supported by easing supply concerns and optimism about trade negotiations; market sentiment further improved after the announcement that the United States plans to replenish its strategic petroleum reserves.
Technical Analysis:
The trend of the December U.S. crude oil futures contract is consistent with what was written in the previous article. After falling to the lower edge of the box, the oil price began to rebound. It has now rebounded to near the middle track, following the same trend from April to June. If the oil price subsequently stands above 58.48, it is expected to continue to rebound.
(Daily chart of the December crude oil futures contract, source: Yihuitong)
At 21:45 Beijing time, the December futures contract of US crude oil was trading at 58.68/69.
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