India has reduced its oil imports from Russia, with shipments dropping to 460,000 barrels per day, the lowest since April 2022. This marks the third consecutive weekly decrease, significantly down from the mid-July average of 1.6 million barrels per day.
Impact Of US Tariffs
The decision follows the introduction of a 25% punitive tariff on India by the US, set to increase to 50% in three weeks as reciprocal tariffs are enacted. Indian state-owned refineries are reportedly instructed to cease purchases of Russian oil in response.
China’s crude oil imports remained strong, totalling 47.2 million tons, or 11.13 million barrels per day, in July. Despite a 5.4% monthly drop, this represents an 11.5% rise compared to July last year. Russia was China’s leading oil supplier in June, delivering over 2 million barrels per day.
Amidst these developments, China’s oil purchases from Russia continue to be a point of contention with the US. The data on the origin of China’s oil imports is expected later this month, providing further insight into global oil trade dynamics.
India pulling back from Russian oil creates a significant gap in the market that must be filled. We see this as a bullish signal for global benchmarks like Brent crude, as Indian refiners must now compete for barrels from the Middle East and West Africa. This sudden redirection of supply will tighten the market for prompt deliveries in the coming weeks.
Geopolitical Risks And Market Volatility
The escalating trade dispute between the US and India introduces significant geopolitical risk, which means higher market volatility is almost certain. We have already seen the CBOE Crude Oil Volatility Index (OVX) jump from the low 30s to 42 in the last several days. Traders should consider buying options to profit from these expected large price swings.
The most direct trade here is on the price difference between Russian Urals and Brent crude. Looking back, we saw this spread widen dramatically to over $30/barrel after European sanctions took hold in mid-2022. With India halting purchases, the Brent-Urals spread has already widened to $18, and we believe it could approach the $25 mark as the US tariffs take full effect.
We must also watch China, which is absorbing a large amount of crude and acting as a partial counterweight. China’s latest Caixin Manufacturing PMI for July 2025 came in strong at 51.5, indicating their energy appetite is not shrinking. This sustained demand will likely keep a floor under global oil prices, preventing a major price collapse.
Attention should now shift to which grades of oil will replace the Russian barrels in India’s refineries. Recent tanker tracking data suggests a sharp rise in inquiries for Iraqi Basrah Light and Saudi Arab Light for September delivery. This could create short-term price premiums for these specific Middle Eastern grades over the next month.
