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What oil deal have the US, India agreed?

After months of strain over India’s purchases of discounted Russian and sanctioned Iranian crude, New Delhi seems to have bowed to US President Donald Trump’s demand by agreeing to section out Russian oil imports and shift towards shopping for extra barrels from the United States — and probably Venezuela.

Trump stated Monday on his Truth Social platform that Prime Minister Narendra Modi deliberate to “stop buying Russian oil,” which the US president stated would assist finish the conflict in Ukraine.

Russia’s vitality revenues — which have financed the battle — fell by a fifth final 12 months, the Financial Times reported final week, including to the strain on Russian President Vladimir Putin to realize a peace deal.

Trump stated India may purchase $500 billion (€424 billion) value ‌of US vitality and coal, together with expertise, agricultural and different merchandise.

Trump framed the transfer as part of a broader commerce deal below which the US would slash its tariffs on Indian items from 50% to 18%, whereas India would minimize its tariffs on American merchandise to zero. New Delhi has but to verify this.

The US tariff price on India had been among the many world’s highest after Trump in August imposed an additional 25% levy on Indian items as punishment for India’s oil purchases from Russia after Moscow’s full-scale invasion of Ukraine. The White House stated the extra tariff would now be scrapped.

Modi confirmed the tariff minimize on X however made no point out of the oil deal. But Reuters information company cited an unnamed Indian authorities official as saying that US petroleum provides have been among the many items included within the deal.

New Delhi has already begun chopping its reliance on Russian crude following US sanctions on oil companies Rosneft and Lukoil.

Last week, Indian Oil Minister Hardeep Singh Puri stated in an interview with Bloomberg that shipments had dropped by practically a 3rd to 1.3 million barrels per day (bpd) in current weeks.

He advised Bloomberg that Indian oil companies are eager to extend imports from Canada and the US as a part of a method to diversify provides throughout greater than 40 international locations.

How rapidly can Russian oil get replaced by US sources?

Fully changing Russian oil imports with US crude is prone to take a number of months to years, as Russian provides make up round 1 / 4 of the roughly 5 million bpd India imports.

According to estimates from energy-tracking agency Kpler printed final 12 months, an entire pivot would increase India’s oil import invoice by $9 to $11 billion yearly, as Russian oil imports are closely discounted, whereas US crude is costlier.

The tariff and sanctions menace has already spurred India to step up its purchases of US oil. The Times of India reported final month that US crude imports rose 92% from April to November final 12 months.

Of the 178.1 million tons of oil India imported, 13 million tons got here from US sources, in comparison with 7.1 million in the identical interval in 2024.

As the world’s largest oil producer, the US has loads to produce. But transferring massive volumes of US crude to India will not be easy.

The voyage takes greater than six weeks, ties up tankers on one of many world’s longest oil routes and is determined by a US Gulf Coast export system that’s already working close to capability.

Trump’s different second-term vitality deal may additionally imply India competing with the European Union for US provides. As a part of its tariff cope with Trump, the EU agreed in July to spend $750 billion via 2028 on procuring US oil, liquefied pure gasoline (LNG), and nuclear vitality merchandise.

Indian refineries are optimized for heavier, bitter Russian Urals crude, which is become diesel and jet gas to match home demand. Switching to lighter, sweeter US crudes would require operational tweaks that might take months.

Can Venezuela ramp up oil provides to fulfill India’s demand?

Trump’s point out of Venezuela may see India probably assist to revive the Latin American nation’s oil sector, which the US has successfully taken management of following the seize of longtime chief Nicolas Maduro final month.

Venezuela’s interim authorities has already minimize a cope with Washington to promote as much as 50 million barrels of crude to US refiners and is reforming vitality legal guidelines to draw overseas funding.

India was a significant purchaser of Venezuelan crude oil till March final 12 months, when Trump levied a 25% tariff on nations conducting oil commerce with Caracas.

Venezuela largely pumps heavy, sulfur‑wealthy crude — the type of dense, tar‑like oil that India’s refineries are set as much as run effectively. But deliveries may very well be impacted by lingering sanctions in addition to comparable logistical hurdles and elevated prices from transferring oil from the opposite facet of the world.

With Venezuela’s oil output nonetheless hovering round 900,000 bpd — a fraction of the three to 4 million barrels it produced within the early 2000s — it’s going to take years, secure politics and big investments to ramp up provides to fulfill India’s demand.

Another problem is value, as Venezuela bought its oil to Asian refineries at a steep low cost on account of US sanctions.

What may very well be the affect on international oil provide?

As any rerouting of India’s oil imports to the US and probably Venezuelan sources will doubtless be a gradual course of, the affect on international oil provides is prone to be restricted and gradual.

India would want to honor current contracts for Russian crude cargoes already booked and in transit. Often, these cargoes have as much as 90-day lead occasions, requiring a gradual winddown over a number of months to keep away from disruptions and penalties.

China, the biggest purchaser of Russian oil, is predicted to additional ramp up its purchases, together with Turkey and African nations.

Global oil flows stay close to balanced to modestly oversupplied, with members ofOPEC+ that account for practically half of world crude output, rising output over the previous 12 months.

US shale, in the meantime, and rising sources like Brazil, Guyana and Argentina, are serving to obtain a world oil surplus, the International Energy Agency (IEA) wrote in a report final month.

These further sources present an ample buffer in opposition to provide disruptions. But that redundancy may very well be rapidly erased if India have been to make a sudden halt to Russian provides.

Edited by: Ashutosh Pandey