India will find it difficult to continue buying cheaper Russian oil after US sanctions on Moscow’s two biggest oil producers, Rosneft and Lukoil, kicked in this month. Such supplies met 36% of its requirements of five million barrels a day since 2023 and eased pressure on its external accounts.
Immediate Impact
Fresh loadings headed to India from Russia have fallen sharply by 47% to 982,000 barrels per day this month from 1.86 million barrels in October, indicating that such flows are set to significantly decline especially from December-January 2026.
India’s state-owned refiners and private ones like Reliance may have paused direct purchases of Russian oil but it is unrealistic to expect that our dependence would go down to near-zero as discounts for Russian Urals crude against dated Brent for December loadings and January arrivals have doubled to $7 a barrel from $3 a barrel before the sanctions took effect. Discounts against the Oman/Dubai benchmark, too, have widened to over $6 a barrel. This may lead to near-term demand for limited quantities of oil from non-sanctioned Russian entities as supplies other than from Rosneft and Lukoil remain legal. That apart, sanctions are bound to result in diversification.
Long-Term Strategy
Looking ahead, all of this implies greater reliance on alternative supplies of crude from West Asia, Latin America, West Africa, and the US and Canada. On the face of it, a favourable conjuncture exists for accessing non-Russian energy options as the global oil market is awash with supplies and prices are heading to lower levels. Brent crude spot prices have been falling from $79 a barrel in January to $64 a barrel in October and stabilising at these levels since then. Forecasts are of a further drop to $62.5 a barrel in the October-December quarter and $54 in the first three months of 2026, according to the US Energy Information Administration (EIA).
But the outlook on prices is also clouded by the sharply conflicting estimates on global oil demand from the Organization of the Petroleum Exporting Countries, EIA, and the International Energy Agency. US President Donald Trump, for his part, is convinced that a lower price of oil will bring Russia’s war in Ukraine to an end and has initiated a fresh peace proposal. But if that effort fails and the war continues, there will be more sanctions on Moscow that can tighten the global oil market and raise prices.
For such reasons, a degree of caution is warranted on India’s part as it looks beyond Russia for its energy requirements, and geopolitics influences oil prices. These are indeed challenging times for India’s energy security due to its massive import dependence which is as high as 88%. On a priority basis, the steady slide in domestic output that has been happening for various reasons—low investment due to obstructive regulations, high taxation, declining output from mature fields—must be reversed. We also lack the technology for deep water exploration. These are interesting times for deep-sea drilling as the global oil major, Chevron, is using new technologies and equipment that can operate at ultra-high pressures, about a third higher than previously deployed, in the Gulf of Mexico to access previously unobtainable resources, according to the Financial Times. Improving relative self-sufficiency must be taken up in a mission mode by incentivising global oil majors to prospect for oil with the latest technologies in our offshore basins and boost domestic output over the medium term.