The US and India are reportedly close to reaching a trade agreement that would see a gradual reduction in Indian Oil imports from Russia, Commerzbank's commodity analyst Carsten Fritsch notes.

US and India near trade deal on Russian Oil

"According to the IEA, India imported around 1.6 million barrels of crude Oil per day from Russia in September. According to weekly data compiled by Bloomberg based on tanker tracking data, Russia's seaborne crude Oil shipments to India were already below 1 million barrels per day in the first three weeks of October, indicating a reduction in imports from Russia."

"The sanctions imposed by US President Trump on Russia's two largest Oil companies are likely to lead to a further reduction in shipments to India. If Russia fails to find alternative buyers, demand for non-Russian Oil would rise and the looming oversupply on the Oil market would be correspondingly lower."

"As a result, Oil prices would be higher than without the sanctions, as yesterday's 5% price increase has already shown. However, the oversupply is likely to counteract significantly higher prices. The situation would be different if China also purchased less crude Oil from Russia. According to Reuters, citing trade sources, Chinese state-owned refineries have suspended purchases of seaborne Oil shipments from Russia in the short term."