For energy market trackers, there's a lot riding on what happens next in the U.S.-India trade talks and how Trump's meeting with Putin goes.
The talks with India are at the more advanced stage, and the ball is now in India's court following the imposition of new U.S. tariffs on Wednesday. Many trade talk trackers have viewed the new tariffs as a as a negotiating tactic designed to force India to buy more U.S. energy products and other goods going forward.
But even though India's fast-growing economy is the fifth largest globally, India's energy importers may have far less room to maneuver than they might appear.
Tight corporate operating margins, cost-sensitive consumer markets, binding long-term import contracts and slowing economic growth all limit India's ability to spend big on U.S. oil, LNG, coal and refined products over the near term.
At the same time, India's location at the base of Asia means it is far closer to other major energy product exporters than it is to the United States, which would trigger sharply higher shipping costs if it were to switch to U.S.-origin products.
No doubt some Indian corporations will be cajoled into pledging major U.S. purchases and investments during upcoming trade negotiations, which may boost sentiment in Washington, D.C.
But U.S. exporters of oil, gas, coal and fuels that are hoping for massive, viable and binding purchase commitments by Indian buyers are likely to be left disappointed.
Details on the wide price spread between Russian and U.S. crude oil, as well as the outlook for U.S. LNG and coal exports to India, are in today's column here.
The upcoming talks between Trump and Putin also have the potential to reshape global commodities trade going forward. The U.S. is preparing to impose secondary sanctions on Russia as part of pressure tactics aimed at forcing Moscow to end the war in Ukraine.
The face-to-face meeting would be the first between a sitting U.S. and Russian president since before Russia invaded Ukraine, and so are of major significance for the global economy.
Given the historical declared affection between Trump and Putin, it can't be ruled out that the talks trigger the start of a normalization process in relations between Russia and the international community. Then again, given Trump's willingness to dole out new punitive measures on counterparties that don't toe the line, a worsening in geopolitical tensions between Russia and the rest of the World could also be the outcome.
For now, oil markets are treading water near recent lows on the assumption that the talks will mark the start of a warming in relations with Russia. But stay tuned...
