In November, India’s oil imports from Russia reached a five-month high of 1.86 million barrels per day. This rise comes as expectations grow that US sanctions will cut Russian imports. Refineries have been buying more oil in anticipation of the sanctions, which started on November 21. In December, a decline in imports is expected, with numbers potentially dropping to around 600,000-650,000 barrels per day, the lowest in three years.

Russia’s Strategic Response

To make up for the reduced imports from India, Russia plans to increase oil shipments to China. However, some Chinese refineries are also looking to reduce their purchases of Russian oil due to US sanctions. If a peace agreement is reached in Ukraine, US sanctions on Russian oil exports may ease, which could stabilize the market. This potential has already affected oil prices, which have decreased as the chance of an end to the Ukraine conflict increases. India’s imports of Russian oil reached a five-month high of 1.86 million barrels per day this November. This surge seems to be a final push before new US sanctions took effect on November 21. In the coming weeks, we expect a significant shift in trading patterns. It’s predicted that India’s imports of Russian oil may plummet in December, dropping to around 600,000 barrels per day, the lowest in three years. This suggests a widening gap between Brent crude and Russian Urals, creating potential for spread trades. We saw a similar situation in 2023 when the price gap on Urals crude widened after the initial G7 price cap was introduced.

Implications for the Global Oil Market

This situation means India will need to source over a million barrels per day from other suppliers, likely pushing global benchmarks like Brent higher. Traders should keep an eye out for increased purchases from Middle Eastern countries, which could tighten the spot market. This may also support call options on Brent futures for delivery in early 2026. Recent tanker data indicates a slight increase in cargo bookings from Saudi Arabia and Iraq to India for December loading. While Russia will try to redirect these surplus barrels to China, reports indicate that Chinese buyers are also reluctant. This uncertainty about supply sources is likely to create more market volatility. Strategies that take advantage of large price swings, regardless of direction, may become more attractive. The biggest unknown is a possible peace agreement in Ukraine, which could lower oil prices by allowing sanctions to be lifted. Recent price drops triggered by peace rumors show just how sensitive the market is to this possibility. Therefore, using put options as a hedge against a sudden price drop from a geopolitical breakthrough could be a wise move. Create your live VT Markets account and start trading now.

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