Russian Oil Prices Plummet as India and China Curtail December Purchases Amid New US Sanctions

Russian Oil Prices Experience Significant Decline

Russian oil prices have experienced a sharp decline, with the country's primary export blend, Urals crude, falling to $36.61 per barrel for cargoes loaded from Novorossiysk at the end of last week. This represents a substantial drop, widening the discount on Urals crude against the North Sea benchmark Brent to $23.51 per barrel, the largest such gap since March 2023. Prior to the latest U.S. measures, Urals typically traded at a $12-13 discount. The current price is also notably below the formal price cap of $47.60 per barrel.

India and China Reduce December Oil Imports

The significant price drop is largely attributed to a sharp reduction in December oil purchases by Russia's two largest customers, India and China. Several major Indian refiners, including Reliance Industries, Bharat Petroleum, Hindustan Petroleum, Mangalore Refinery and Petrochemicals, and HPCL-Mittal Energy, have halted direct purchases from the sanctioned Russian companies. These Indian refiners previously accounted for approximately 1 million barrels per day of Russian crude. Similarly, Chinese state-owned refiners Sinopec and PetroChina, alongside smaller private plants, have also suspended direct buying, impacting nearly 45% of Russian oil exports to China.

New US Sanctions Target Major Russian Oil Companies

The reduction in purchases by India and China comes in anticipation of new U.S. sanctions targeting major Russian oil companies, Rosneft and Lukoil. These sanctions, announced in late October 2025, are set to take full effect with a deadline of November 21, 2025, for winding down all transactions involving these entities. The U.S. Treasury Department confirmed that these measures are already reducing Russia's oil revenues and are designed to degrade the Kremlin's ability to fund its military operations. Rosneft and Lukoil collectively account for about half of Russia's crude exports, totaling approximately 2.2 million barrels per day. While some waivers for Lukoil's foreign business have been extended until December 13, 2025, and for its Bulgarian companies until April 29, 2026, the overall impact remains significant.

Economic Implications for Russia and Global Markets

The sudden decrease in demand has left Russian suppliers with growing volumes of unsold oil at sea. JPMorgan estimates that roughly one-third of Russia's seaborne exports, amounting to approximately 1.4 million barrels per day, are currently being held in floating storage. This situation is expected to further strain the Russian budget, which has already seen revenues fall by over 20% this year. Energy sector revenues constitute 40% of the Russian Federal budget income, making the disruption a critical concern. The 27% revenue collapse in October alone implies an estimated $3.6 billion monthly fiscal pressure. Meanwhile, global oil markets are grappling with concerns about a potential glut, though increased buying from other sources by India and China has provided some support to Middle Eastern, U.S. shale, and South American producers.