China cuts Saudi orders for Russian crude while Trump punishes India with steep tariffs
Chinese refiners are cutting back on orders for Saudi oil, with the decline hinting at a shift in global crude flows as more Russian barrels enter the market, according to Energy Aspects Ltd. The London-based consultant said in an 11 August note that the drop in so-called nominations for September-loading term cargoes from Saudi Aramco showed refineries were holding back purchases due to greater availability of Russia’s Urals crude and comfortable stockpiles. The note did not cite any sources. The global oil market is closely watching the potential reordering of flows after the United States and European Union increased pressure on India over its imports of Russian energy. With no comparable action taken against China, there is growing speculation that more of Moscow’s oil will be bought by mainland refiners, including Urals crude shipped from Russia’s western ports. Bloomberg, citing traders informed by the producer, reported that Saudi Aramco will sell 43 million barrels of September-loading crude under contractual supplies to China. This is down from 51 million barrels in the previous month and below the year-to-date monthly average of about 45 million barrels. China had earlier defended its Russian oil imports as legitimate, responding to US pressure after Washington imposed secondary tariffs on India over its energy purchases from Moscow. Energy Aspects said Chinese interest in Urals crude is increasing as it remains the “most competitive” compared with similar Middle Eastern grades. However, the consultancy added that China’s intake has a limit, as Russian imports already account for 17% of its overseas supplies, with 20% viewed as the ceiling for a single country. Trump targets India with steep tariff hike US President Donald Trump had this month cited India’s imports of Russian crude when announcing an additional 25% tariff on imports from India. The measure, set to take effect on August 28, could push tariff rates on some Indian goods to as much as 50% — high enough to effectively hit U.S. imports from India, which reached nearly $87 billion in 2024. The move appears aimed at increasing Trump’s leverage with Russian President Vladimir Putin ahead of their planned meeting in Alaska this week, with India being used as a bargaining tool in the process. Meanwhile, a White House official said on Monday that Trump has extended a tariff truce with China by another 90 days, preventing the imposition of triple-digit duties on Chinese goods. The new decision stops U.S. tariffs on Chinese goods from jumping to 145%, and Chinese tariffs on U.S. goods from rising to 125%. For now, it keeps U.S. tariffs on Chinese imports at 30%, while China’s tariffs on U.S. imports stay at 10%. Indian refiners have become the world’s biggest buyers of Russian oil after turning to discounted supplies in the wake of Western sanctions on Moscow over its invasion of Ukraine in February 2022. Russia’s share of India’s total oil imports jumped from just 1.7% in 2019–20 (FY20) to 35.1% in FY25, making it India’s largest oil supplier. India has sharply criticised the United States and European Union, accusing them of unfairly singling it out over Russian oil purchases while both continue to trade extensively with Moscow despite the war. In a statement issued earlier this month, India’s Foreign Ministry said: “It is revealing that the very nations criticising India are themselves indulging in trade with Russia.” The ministry added: “It is unjustified to single out India.” Former Reserve Bank of India Governor Raghuram Rajan told Valor International that stopping purchases of Russian oil would not be a disaster for India, as current prices are not much higher than those for Russian crude. If Russian oil supplies were cut off completely, prices would go up, but India could cope, he said. He said the bigger problem is political. A decision to stop buying from Russia would be seen at home as giving in to U.S. pressure, which is unpopular in any democracy, Rajan said. If Washington had quietly asked India to phase out Russian oil, it might have been acceptable. Making it public and linking it to a tariff threat makes it much harder politically, he added.
Saudi Crude Shipments to China Poised to Fall in September
Saudi Arabia will ship lower volumes of its crude to China next month, down from a two-year-high this month, after the Kingdom raised its September prices to Asia for a second consecutive month, Reuters reported on Monday, quoting trade sources at Chinese refiners. Saudi Arabia, the world’s biggest crude oil exporter, is expected to deliver about 43 million barrels of crude to China in September, according to a Reuters estimate of allocations for refiners. This is equal to 1.43 million bpd of Saudi shipments to the world’s largest crude oil importer next month, down from an estimated 1.65 million bpd which Saudi Aramco has allocated to Chinese refiners for August. Sinopec, the biggest refiner in Asia, and its Fujian Refinery joint venture with Saudi Aramco, are among refiners that plan to reduce their intake of Saudi crude in September, according to Reuters’ sources. The lower expected shipments would come as Saudi Aramco last week raised the official selling prices (OSPs) for its crude loading for Asia in September as it bets on robust demand. The flagship Saudi grade Arab Light will sell in Asia next month at a premium of $3.20 per barrel above the Oman/Dubai average, the Middle East benchmark, off which shipments to Asia are priced. The hike is $1.00 a barrel above the August price, as well as the second consecutive rise in the price of Arab Light loading for Asia. Saudi Arabia also lifted the official selling prices (OSPs) for the other grades, Arab Extra Light, Arab Medium, and Arab Heavy, by between $0.70 and $1.20 per barrel above benchmarks. The second consecutive increase in prices suggests that Saudi Arabia expect continued robust demand in its key exporting region, Asia, in the coming weeks. A potential reduction of Russian supply to India, due to the new tariffs, could also boost the demand for Saudi and other Middle Eastern crude shipments to Asia next month and going forward.
The crude oil market bets Trump’s India threats are hollow
The crude oil market’s rather sanguine reaction to the U.S. threats to India over its continued purchases of Russian oil is effectively a bet that very little will actually happen. President Donald Trump cited India’s imports of Russian crude when imposing an additional 25% tariff on imports from India on August 6, which is due to take effect on August 28. If the new tariff rate does come into place, it will take the rate for some Indian goods to as much as 50%, a level high enough to effectively end U.S. imports from India, which totalled nearly $87 billion in 2024. As with everything related to Trump, it pays to be cautious given his track record of backflips and pivots. It’s also not exactly clear what Trump is ultimately seeking, although it does seem that in the short term he wants to increase his leverage with Russian President Vladimir Putin ahead of their planned meeting in Alaska this week, and he’s using India to achieve this. Whether Trump follows through on his additional tariffs on India remains uncertain, although the chances of a peace deal in Ukraine seem remote, which means the best path for India to avoid the tariffs would be to acquiesce and stop buying Russian oil. But this is an outcome that simply isn’t being reflected in current crude oil prices. Global benchmark Brent futures have weakened since Trump’s announcement of higher tariffs on India, dropping as low as $65.81 a barrel in early Asian trade on Monday, the lowest level in two months. This is a price that entirely discounts any threat to global supplies, and assumes that India will either continue buying Russian crude at current volumes, or be able to easily source suitable replacements without tightening the global market. Are these reasonable assumptions? The track record of the crude oil market is somewhat remarkable in that it quickly adapts to new geopolitical realities and any price spikes tend to be shortlived. The Russian invasion of Ukraine in February 2022 sent crude prices hurtling toward $150 a barrel as European and other Western countries pulled back from buying Russian crude. But within four months the price was back below where it was before Moscow’s attack on its neighbour as the market simply re-routed the now discounted Russian oil to China and India. In other words, the flow of oil around the globe was shifted, but the volumes available for importers remained much the same. DIFFERENT THIS TIME? But what Trump is proposing now is somewhat different. It appears he wants to cut Russian barrels out of the market in order to put financial pressure on Moscow to cut a deal over Ukraine. There are effectively only two major buyers for Russian crude, India and China. China, the world’s biggest crude importer, has more leverage with Trump given U.S. and Western reliance on its refined critical and other minerals, and therefore is less able to be coerced into ending its imports of Russian oil. India is in a less strong position, especially private refiners like Reliance Industries, which will want to keep business relationships and access to Western economies. India imported about 1.8 million barrels per day of Russian crude in the first half of the year, or about 37% of its total, according to data compiled by commodity analysts Kpler. About 90% of its Russian imports came from Russia’s European ports and was mainly Urals grade. This is a medium sour crude and it would raise challenges for Indian refiners if they sought to replace all their Urals imports with similar grades from other suppliers. There are some Middle Eastern grades of similar quality, such as Saudi Arabia’s Arab Light and Iraq’s Basrah Light, but it would likely boost prices if India were to seek more of these crudes. If Chinese refiners were able to take the bulk of Russian crude given up by India, it may allow for a re-shuffling of flows, but that would not appear to be what Trump wants. Trump and his advisers may believe there is enough spare crude production capacity in the United States and elsewhere to handle the loss of up to 2 million bpd of Russian supplies. But testing that theory may well lead to higher prices, especially for certain types of medium crudes which would be in short supply. It’s simplistic to say that higher U.S. output can supply India’s refiners, as this would mean those refiners would have to be willing to accept a different mix of refined products, including producing less diesel, as U.S. light crudes tend to make more products such as gasoline. For now the crude oil market is assuming that the Trump/India/Russia situation will end as another TACO, the acronym for Trump Always Chickens Out. But the reality is likely to be slightly more messy, as some Indian refiners pull back from importing from Russia, some Chinese refiners may buy more and once again the oil market goes on a geopolitical merry-go-round.
Oil Prices Begin the Week Lower as Trump-Putin Meeting Looms
Crude oil prices extended their losing streak from last month, opening lower today on expectations that the Friday meeting between the presidents of Russia and the United States would yield a deal resulting in more oil supply. At the time of writing, Brent crude was trading at $66.24 per barrel, with West Texas Intermediate at $63.43 per barrel, after booking a drop of some 4% last week, after the deadline President Trump had set for Russia to end the war in the Ukraine passed and no stricter sanctions were effected as threatened, ING’s commodity analysts said. Russia’s demands include the Ukrainian government ceding eastern provinces, which it has indicated it would not agree to, and this casts doubts over the success of the Trump-Putin talks, Warren Patterson and Ewa Manthey noted. “If we do see some level of de-escalation, it would remove sanction risk from the oil market. This would likely drive prices lower, given the bearish fundamentals,” the analysts added. Bloomberg cited unnamed sources as saying the deal would indeed likely include recognizing the Donbass as Russian and the U.S. side was working to convince the Ukrainians and their European backers to accept it. This, however, was unlikely, the Bloomberg sources said, making any successful deal to end the hostilities highly uncertain. This, in turn, means the upside potential for oil prices remains rather intact. “If peace talks falter and the conflict drags on, the market could quickly pivot to a bullish stance, potentially triggering a sharp rally in oil prices,” Reuters quoted the founder of Indian research firm SS WealthStreet, Sugandha Sachdeva, as saying. Meanwhile, Trump’s tariffs on a host of trade partners continue to pressure oil prices due to their expected negative effect on overall economic activity in much of the world, according to analysts.
Indian refiners can do without Russian oil, but with trade-offs
Indian refiners, the world’s biggest user of Russian oil, can operate without supplies from Moscow from a technical standpoint, but the shift would involve major economic and strategic trade-offs, analysts said. Russian crude supports high distillate yields – the share of crude converted into fuels like petrol, diesel, and jet fuel through distillation. Replacing Russian crude, which accounts for up to 38 per cent of India’s refinery intake, with alternatives will shift yields, resulting in lower middle distillates (diesel and jet fuel) and higher residue outputs, according to global real-time data and analytics provider Kpler. US President Donald Trump last week announced an additional 25 per cent tariff on US imports from India — raising the overall duty to 50 per cent — as a penalty for the country’s continued imports of Russian oil. Since the steep tariffs are likely to hit the USD 27 billion of non-exempt exports that India does to the US, there has been chatter around stopping or curtailing oil imports from Russia. “Indian refiners can operate without Russian crude from a technical standpoint, but the shift would involve major economic and strategic trade-offs,” Kpler said in a report, ‘US Tariffs on Indian Imports: Implications for Energy Markets & Trade Flows’. India turned to purchasing Russian oil sold at a discount after Western countries imposed sanctions on Moscow and shunned its supplies over its invasion of Ukraine in February 2022. Consequently, from a mere 1.7 per cent share in total oil imports in 2019-20 (FY20), Russia’s share increased to 35.1 per cent in FY25, and it is now the biggest oil supplier to India.
Govt to review petrol pump licensing norms
The government is considering further easing the norms for setting up petrol pumps in the world’s fastest-growing fuel market, in light of the evolving energy security paradigm and commitment to decarbonisation, according to an official order. The government had in 2019 relaxed the norms for setting up petrol pumps, opening the door for non-oil companies to enter the fuel retailing business. At that time, companies with a net worth of Rs 2.50 billion were permitted to sell petrol and diesel, provided they committed to setting up infrastructure for at least one new-generation alternative fuel, such as CNG, LNG, biofuels, or EV charging, within three years of beginning their operations. For companies wanting to sell petrol and diesel to retail and bulk consumers, the networth criteria was set at Rs 5 billion. The Ministry of Petroleum and Natural Gas has now constituted an expert committee to review the 2019 guidelines for granting authorisation to market transportation fuels. The expert committee will “assess the effectiveness of the framework envisaged in Resolution dated November 8, 2019, in ensuring energy security and market efficiency; align the policy framework with national commitment towards decarbonisation, electrical mobility and promotion of alternative fuel; and address issues in implementation of existing guidelines,” the order said. The committee is headed by Sukhmal Jain, former director (marketing) of Bharat Petroleum Corporation Ltd (BPCL). Other members of the four-member committee are Petroleum Planning and Analysis Cell (PPAC) Director General P Manoj Kumar, FIPI member PS Ravi and Arun Kumar, Director (Marketing) in the ministry. An August 6 notice of the ministry sought stakeholder/general public comments/suggestions on the matter within 14 days. Prior to the 2019 change, to obtain a fuel retailing license in India, a company had to invest or commit to invest Rs 20 billion in either hydrocarbon exploration and production, refining, pipelines or liquefied natural gas (LNG) terminals.
No direction from govt to buy or stop Russian oil intake: HPCL
Amid higher US tariffs on India because of Russian oil, centre-owned Hindustan Petroleum Corp. Ltd. said that there is no direction from the government to buy or stop Russian oil intake. This comes after market speculations about state-owned oil refiners pulling back from purchases of Russian crude oil. However, chairman Vikas Kaushal said that the company is scouting for alternative crudes to protect itself if it were to stop buying Russian oil due to higher prices and sanctions. The chairman said that while there was no official directive from the government regarding the purchase of Russian oil, HPCL’s Russian oil intake in the June quarter fell to 13.2% due to narrowing discounts. “It’s not because of any geopolitical reason. It was an economic decision based on what we needed to run in our refineries,” he added. HPCL remains open to buying Russian oil if it becomes competitively priced again, he said, adding the company would be able to absorb the financial loss for not processing Russian oil as it has already cut its Russian oil processing. US President Donald Trump has announced an additional 25% duty on imports from India due to its oi business with Russia after an earlier announced 25% tariff. There are major speculations about companies including Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp. planning to skip spot purchases of the crude in the upcoming buying cycle, until there’s clear government guidance. Trump’s recent tariff announcements have created wide-ranging uncertainties in the Indian oil market.
India’s fuel bill may rise by $9 bn in FY26 and $12 bn in FY27, if it stops Russian oil imports: SBI
India’s crude oil import bill could increase by USD 9 billion to USD 12 billion, if the country stops buying Russian crude oil, according to a report by the State Bank of India (SBI). The report noted that if India halted oil imports from Russia for the rest of FY26, the fuel bill might increase by USD 9 billion in FY26 and USD 11.7 billion in FY27 due to increase in prices. SBI stated “if India stopped oil imports from Russia during the rest of FY26, then India’s fuel bill might increase by only USD 9 billion”. Russia currently accounts for 10 per cent of the global crude supply. If all countries stopped buying from Russia, crude oil prices could rise by around 10 per cent, provided no other countries increase their production. India substantially increased purchasing of Russian oil since 2022, which was sold at a discount, capped at USD 60 per barrel, to ensure energy security after Western nations imposed sanctions on Moscow and avoided its supplies following the invasion of Ukraine. As a result, Russia’s share in India’s total oil imports surged from just 1.7 per cent in FY20 to 35.1 per cent in FY25, making Russia India’s largest oil supplier. In volume terms, India imported 88 million metric tonnes (MMT) of crude from Russia in FY25, out of its total oil imports of 245 MMT. Before the Ukraine war, Iraq was India’s top crude supplier, followed by Saudi Arabia and the United Arab Emirates (UAE). Indian refiners generally source oil from Middle Eastern producers through annual contracts, which allow flexibility to request additional supplies each month. Since the imposition of sanctions on Russia, refiners have also turned to crude suppliers in the United States, West Africa, and Azerbaijan. India has further diversified its oil sources to about 40 countries. New supply options have emerged from Guyana, Brazil, and Canada, adding to the country’s energy security. If Russian supplies were cut off, India could shift back to its traditional Middle Eastern suppliers under existing annual deals, ensuring flexibility in meeting its import needs. The SBI report highlighted that while the potential increase in the import bill is significant, India’s diversified supply network and established contracts with other oil-producing nations may help cushion the impact. However, a rise in global crude prices due to reduced Russian exports would still put upward pressure on costs.
The key pillar of Russia’s war chest is cracking. The timing couldn’t be worse
In July, Russian President Vladimir Putin’s administration collected 787.3 billion rubles, or $9.8 billion, from oil and gas revenue — 27% lower than a year ago, according to the country’s finance ministry on Tuesday. The decline in energy tax revenue further strains Russia’s budget, which posted a deficit of 3.7 trillion rubles, or 1.7% of GDP, in the first half of the year. Oil and gas remain vital to Russia’s economy and to funding its war, now in its fourth year. That funding is now under threat on multiple fronts. Last month, the European Union unveiled its 18th sanctions package against Russia. It replaced the fixed $60-per-barrel cap on Russian oil with a more flexible mechanism that limits prices to 15% below global market averages, effectively slashing Moscow’s revenue on each exported barrel. But the pressure isn’t just coming from Europe. Recently, Trump has sharpened his rhetoric — and trade threats — against countries buying Russian oil, singling out India, a top buyer of the fuel. Last week, Trump announced a 25% tariff on Indian goods and a “penalty” for its purchases of Russian oil. Recently, Trump has sharpened his rhetoric — and trade threats — against countries buying Russian oil, singling out India, a top buyer of the fuel. Last week, Trump announced a 25% tariff on Indian goods and a “penalty” for its purchases of Russian oil. “Putin will stop killing people if you get energy down another $10 a barrel. He’s going to have no choice because his economy stinks,” Trump told CNBC on Tuesday. Even with Trump’s ultimatum, Russia is likely to dig in its heels, according to Tatiana Orlova, a lead emerging markets economist at Oxford Economics. “The Russian leadership seems to view the economy’s resilience during the first three and a half years of war as proof that it is immune to further sanctions,” Orlova wrote in a Wednesday note.
Oil Prices Rise After Trump Targets India’s Imports
Oil prices ticked higher in early Thursday trading in Asia, buoyed by renewed trade tensions and a surprise decline in U.S. crude inventories. The modest rebound follows a rough week for crude, which had slumped to two-month lows on concerns over rising OPEC+ output and faltering global demand. At the time of writing, Brent crude futures for October delivery rose 0.88% to $67.48 per barrel, while West Texas Intermediate futures climbed by 0.98% to $64.98. The upward momentum was driven in part by a new wave of geopolitical uncertainty after President Trump signed an executive order ramping up tariffs on Indian imports. The move is a direct response to New Delhi’s continued purchases of Russian oil, with tariffs set to reach a cumulative 50% and take effect on August 28. India is the world’s third-largest oil importer, and its increasing reliance on discounted Russian crude has drawn sustained criticism from Washington. Trump’s decision to target India comes alongside fresh warnings aimed at China, another major buyer of Russian oil. The tariff measures are part of a broader U.S. strategy to tighten pressure on the Kremlin as the war in Ukraine drags on. With Trump now saying there is a “good prospect” of a summit with Putin and Zelensky. While Trump’s latest action adds to global tensions, analysts at ANZ pointed out that the 21-day delay before implementation leaves room for possible negotiations, potentially softening the impact. Nevertheless, the prospect of disrupted trade routes and shifts in global oil flows injected a degree of bullishness into the market. If India and China are forced to reduce purchases from Russia under tariff pressure, they may turn to other suppliers—tightening available supply elsewhere and potentially lifting prices. Another factor underpinning Thursday’s price recovery was an unexpectedly large drawdown in U.S. crude inventories. Weekly data from the Energy Information Administration (EIA) showed a 3 million barrel decline in crude stockpiles, far exceeding analysts’ expectations of a 200,000-barrel build. The inventory data suggests stronger-than-anticipated demand or tighter domestic supply in the U.S., which helped offset some of the broader bearish sentiment in the market. However, the longer-term outlook for oil does not appear to have changed. Prices are still down sharply over the past week, weighed by signs of weakening global demand and rising production among OPEC+ members. The OPEC+ alliance, which includes Russia and Saudi Arabia, announced plans last week to proceed with a sharp output increase in September. The move comes despite the current soft pricing environment and reflects member states’ need to bolster fiscal revenues after months of underwhelming oil receipts. If output continues rising while demand remains underwhelming, oversupply could become a persistent feature in the market heading into the fourth quarter. Adding to the bearish undertone are recent weak economic indicators from both the United States and China. A string of disappointing manufacturing and services data has fueled concern that energy demand could stagnate or even contract in the coming months. China, in particular, has seen lackluster industrial activity and tepid consumer sentiment, raising doubts about its role as a growth engine for oil demand in 2025. The rise of tariff politics under Trump’s leadership is injecting new volatility into the market, as traders now face the dual uncertainty of trade policy and production policy as they try to assess where prices go from here.