Russian Urals Crude Gains Ground in Asia as U.S.–India Trade Tensions Escalate

Key Highlights:

• Urals crude retains price advantage over Saudi grades in Asia.
   
• Russia supplies 35% of India’s oil imports, 17% of China’s.
   
• U.S. announces additional 25% tariff on Indian imports.
   
• Saudi Aramco cuts China supplies, may reprice to regain share.

Petroleum Pricing & Competitiveness

• Urals Crude: Remains the most competitive grade for Chinese refiners, priced below comparable Middle Eastern grades.
• Saudi Crude: Pricing is stable but losing market share due to Russian discounts.
• Indian Imports: Russian barrels remain priced attractively despite Western sanctions; however, potential U.S. tariff impacts could indirectly affect landed costs for refined products.
• Market Sentiment: Price differentials between Urals and Saudi grades are influencing trade flows more than headline Brent or WTI levels.

Global Supply & Demand Shifts

• China: September nominations from Saudi Aramco drop to 43 million barrels from 51 million barrels in August, signalling a shift toward Russian supply. Urals crude now makes up 17% of China’s imports, with a theoretical cap at 20%.
• India: Russia now accounts for 35.1% of India’s oil imports, up from 1.7% in FY20. India remains the largest global buyer of Russian crude.
• Global Flows: Saudi oil exports to China decline; Russia captures a larger share of Asian demand.
• Demand Factors: Chinese refiners have comfortable inventories; Indian demand remains steady despite geopolitical tensions.

Key Geopolitical & Trade Developments In Petroleum Market

• China–Russia Energy Ties: Chinese refiners defend Russian oil purchases as “legitimate & lawful” amid U.S. criticism of similar Indian imports.
• U.S.–India Trade Tensions: President Trump announces an additional 25% tariff on Indian imports, potentially pushing some rates to 50%, effective August 28. Move is linked to pressure on India over Russian crude imports.
• Saudi Aramco Adjustments: Cuts contractual supplies to China below year-to-date average, shifting the competitive dynamic in Asian crude markets.
• Tariff Truce with China: Trump extends a 90-day pause on escalating tariffs, preventing U.S.–China trade duties from jumping to triple digits.

Market Expectation: Short-Term Outlook & Market Dynamics

• Short-Term: Urals crude is expected to remain competitive and retain its pricing advantage over Saudi grades, keeping Russian market share in China elevated near the 17–20% ceiling.
• India Outlook: U.S. tariff threats could create near-term political tension but are unlikely to significantly disrupt Russian crude purchases due to pricing advantages and domestic political optics.
• Saudi Strategy: Likely to reprice or offer incentives to recover lost share in Asia.
• Macro Trend: Geopolitical manoeuvring between U.S., China, India, and Russia will continue to dictate crude flow patterns more than pure supply-demand fundamentals.