Oil prices were little changed in the current week, with bearish sentiment still ruling the markets after the U.S. agreed to a one-year truce to its trade war with China, despite reports that Indian refiners are ditching Russian oil following fresh U.S. sanctions. Brent crude for December delivery traded at $65.07/bbl at 2.22 pm ET on Friday, a slight drop from $66.48/bbl a week ago, while the corresponding WTI contract was changing hands at $60.92/bbl, down from $61.95/bbl.
Last week, the Trump administration announced fresh sanctions targeting Russia’s oil and gas giants, Rosneft and Lukoil, just days after the UK unveiled similar sanctions. Previously, Trump threatened tough measures against Moscow for failing to agree to a peace pact with Ukraine, but had avoided making good on his threats. And now there are reports that Indian refiners are shunning Russian oil in favor of costlier U.S. and Middle Eastern grades in a bid to avoid incurring Trump’s wrath.
Over the past three years, India has been taking advantage of cheap Russian crude, frequently offered at discounts of $8-$12 per barrel over Middle Eastern benchmarks. Russia has consistently been India’s largest supplier since mid-2022, with India buying ~1.75 million barrels per day from Russia at its peak, largely from Lukoil and Rosneft. India typically imports 86% of the oil it consumes. However, the latest round of U.S. sanctions targeting shipping, insurance and trading networks that Indian refiners leveraged to buy Russian oil at scale has narrowed those discounts and raised transaction risks, making Russian oil far less attractive.
Further, the sanctions have made banks more cautious with settlement channels. Consequently, the share of Russian oil in India’s import basket has declined to 34% in the current year from 36% in the previous two years. In contrast, U.S. crude imports into India surged to 575,000 barrels per day in October, the highest level in three years, signalling a deliberate pivot. India will now have to contend with higher energy bills, “Crude oil prices surged sharply following fresh sanctions on Russian oil majors, sparking tightening supply fears and renewed inflation concerns. This could negatively impact India, as elevated crude prices may widen the fiscal deficit and strain the import bill,” Vinod Nair, Head of Research at Geojit Investments, said.
Commodity analysts at Standard Chartered have predicted that the oil price trajectory will be determined by the quantity of Russian barrels removed from supply following the sanctions. Rosneft and Lukoil exported 1.9 million barrels per day (mb/d) of crude via sea over the past year, most of it to India and China. China also imported ~ 800K barrels of crude per day (kb/d) from Rosneft via pipeline.
