Concerns about potential supply disruptions, which had temporarily driven up prices, have been alleviated by Russia’s agreement to a 10-to-12-day deadline to end its invasion and implement a complete ceasefire in Ukraine.
Trade flows are expected to be hit with the latest US deadline and the previous EU sanctions on Russian energy products aim to limit Moscow’s revenues.
According to Rystad Energy’s estimates, crude oil exports to India are likely to be affected most.
“Crude exports to China are unlikely to be impacted, however flows to India are most at risk, with Middle Eastern OPEC+ nations potentially filling the gaps,” Janiv Shah, vice president, commodity market analysis at Rystad Energy, said in an emailed commentary.
A 25% tariff on goods imported from India will be implemented on August 1, eliminating any possibility of a limited trade agreement.
Sanctions on India’s Nayara
This package included a reduced oil price cap, a ban on importing petroleum products made from Russian oil, and sanctions against 105 additional shadow fleet tankers.
It also targeted India’s Nayara refinery in Vadinar, due to Rosneft being a major shareholder.
New US tariffs of 100% on countries buying Russian oil are effective August 9 unless a Russia-Ukraine ceasefire is reached.
Additionally, India faces additional 25% tariffs and potential penalties for recent Russian energy purchases.
Russia’s oil industry has only recently fully adjusted to the US sanctions implemented by the Biden administration on January 10.
Discounts on Urals crude at Russia’s western ports have decreased to approximately $10 per barrel relative to Brent. This marks the smallest discount observed since the implementation of the EU embargo and price cap on Russian oil, according to Rystad Energy.
Russian exports to India at risk
New tariffs on Russian crude oil purchases could significantly impact Russia’s exports to India.
Moreover, US import tariffs would significantly impact India, given that Indian exports to the US reached $81 billion in 2024, representing 18% of India’s total exports.
Based on Rystad Energy’s estimations, Russia’s crude oil exports to India total approximately 1.6 million barrels per day (bpd). Of this, about 500,000 bpd are supplied through a long-term contract between Reliance (NSE:RELI) and Rosneft.
Rystad said:
It is likely that this long-term contract will be exempted from sanctions.
“We believe Russia will be able to redirect some of these flows to China,” the Norway-based energy intelligence company said.
There could also be an increase in utilization of domestic refineries (in India) if U.S. actions do not extend to refined products.
OPEC+ to fill in the gap
The market was already projected to have a surplus of approximately 1 million barrels per day in the fourth quarter of 2025 and throughout 2026, even prior to the implementation of the new sanctions.
OPEC+ had been raising oil production since April as they unwind their voluntary production cuts of 2.2 million barrels per day. The group had been raising production over 411,000 bpd each month since May, and in August it is expected to raise oil output further by 548,000 bpd.
The unwinding of the voluntary production cuts were originally scheduled to take place between April 2025-September 2026.
Production increases already planned in OPEC+ countries and higher output from non-OPEC+ producers, particularly the US, Canada, Brazil, and Guyana, could therefore offset the loss of Russian volumes.
Meanwhile, pressure on Russia has mounted in recent weeks following a cyberattack that targeted Aeroflot, the state airline, along with online government services and pharmacy networks.
Signals point towards an unlikely resolution for Russia to agree to a ceasefire by August 9.
Shah said:
The accelerated deadline from the US for Russia to confirm a peace deal is unlikely to be adhered to, as US frustration shows.
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