Crude Slips Ahead of OPEC+ Meeting and New Russia Sanctions

Oil prices are losing ground this week as global energy politics take another turn. Fresh U.S. sanctions on Russia's largest oil producers and uncertainty ahead of the upcoming OPEC+ meeting have pushed crude futures down by 72 cents per barrel this morning. The market, which rallied last week on fears of tighter supply, is now recalibrating expectations as buyers in Asia rethink how to navigate shifting trade routes and compliance risks.

The latest market movement follows the U.S. decision to impose sanctions on Russia's two largest oil companies, Rosneft and Lukoil. This measure, intended to reduce Moscow's oil revenues, has caused buyers across Asia to reassess their exposure. The price of Russian ESPO crude, which recently traded at a $1 premium to Brent, has now dropped to a 50-cent discount after several Chinese state-owned companies canceled cargoes.

In India, refiners are taking mixed positions. Indian Oil Corp confirmed it won't stop purchasing Russian crude as long as the transactions comply with international restrictions. However, other refiners, including Mangalore Refinery and Bharat Petroleum, have paused new orders while seeking clarity from regulators and suppliers. Some are turning to the spot market to secure December cargoes from Iraq and the United States, though these replacements come at a higher delivered cost than Russian grades.

As trade patterns adjust, India remains a central player in the global crude balance. Since Russia invaded Ukraine in 2022, India has become the largest buyer of seaborne Russian oil, accounting for roughly 40% of Russia's total exports this year. Any sustained reduction in Indian purchases could redirect flows and alter global pricing structures.

Meanwhile, refined product markets are showing different trends. Diesel cracks rose to their highest level since February 2024, indicating firm consumption and stronger refinery margins. At the same time, crude volumes on water have climbed to about 1.4 billion barrels, the highest level since 2016. This rise points to increased floating storage and delayed deliveries as traders adjust to changing trade routes.

Attention now turns to the upcoming OPEC+ meeting, where the group is expected to approve a production increase of roughly 137,000 barrels per day. The decision comes as member nations balance internal targets with external pressures from Washington and Moscow. While Saudi Arabia maintains the capacity to raise output, Russia, facing new restrictions, may push to limit production growth.

Despite ongoing uncertainty, the International Energy Agency noted that the overall impact of sanctions could remain limited due to existing spare capacity and diversified supply. Still, the market continues to monitor how quickly refiners in India and China adapt to the new sanctions environment and whether further adjustments will be required.

For now, crude prices hover near $60 per barrel as the industry waits for a clearer direction from OPEC+ and greater visibility in the trade response from Asia's largest importers.