Key Takeaways
India and China became the largest buyers of Russian oil after Western countries halted their purchases following Russia’s invasion of Ukraine.
Russian oil now accounts for about 40% of India’s oil imports and about 20% of China’s oil imports.
President Trump is urging the European Union to place tariffs of up to 100% on China’s and India’s imports as part of a strategy to pressure Russia into ending its war with Ukraine.
OPEC+, of which Russia is a member, is increasing its oil production to maintain market share.
Russia has little to no spare oil capacity, as sanctions have significantly reduced investment.
Saudi Arabia is increasing production by almost one million barrels per day, despite lower expected oil prices, to reassert discipline in OPEC+ and expand the group’s market share, thereby solidifying its relationship with the United States.
U.S. oil producers are struggling with oil prices below $70 per barrel and are reducing staff and investment in new drilling.
India and China became the largest buyers of Russian oil after Western countries halted their purchases following Russia’s invasion of Ukraine. Russian oil now accounts for about 40% of India’s oil imports and about 20% of China’s oil imports. President Trump doubled tariffs on imports from India to 50% in response to India’s continued purchases of Russian oil. Since the United States is India’s largest trading partner, the increased tariff could lower India’s GDP by 0.5%. President Trump has capped additional tariffs on U.S. imports from China at 30%, with trade negotiations ongoing. He is urging the European Union to place tariffs of up to 100% on China’s and India’s imports as part of a strategy to pressure Russia into ending its war with Ukraine. Russia’s seaborne oil exports total around 3.2 million barrels per day.
Russia is not a member of the Organization of the Petroleum Exporting Countries (OPEC), but did sign an agreement with other allies as part of OPEC+. The group has agreed to raise oil production again beginning in October, looking to keep the group’s market share intact. The group of eight core OPEC+ members will raise its oil output target by 137,000 barrels per day in October.
Saudi Arabia’s output is expected to increase from 9.07 million barrels per day in March to 9.98 million in September, which will leave it with around 2.2 million barrels per day of spare capacity. Under OPEC+ cuts, Saudi Arabia and Russia each reduced output by about 500,000 barrels per day. Due to Western sanctions that have limited investment in new production, Russia has little, if any, spare capacity.
OPEC+ has been increasing production since April after years of cuts to sustain oil prices. Between April and September, the group had raised production quotas by about 2.5 million barrels per day, around 2.4% of global demand, which put downward pressure on oil prices. Oil prices have declined by about 18% from their 2025 high in mid-January to $67 a barrel, with increases from OPEC+ and increased production from non-OPEC+ producers.
OPEC+ agreed to begin undoing the 1.65 million barrels per day of production cuts that were set to remain in place until the end of 2026. According to Reuters, because the pace of increases is slow, it could take 12 months to remove the full 1.65 million barrels per day of cuts, leaving the alliance with another two million barrels per day of production cuts still in place until the end of 2026. OPEC+ could accelerate, pause, or reverse hikes at future meetings. Its next meeting of the eight countries is scheduled for October 5.
Due mainly to production increases by non-OPEC+ countries, including Argentina, Canada, and the United States, the oil market is expected to be in oversupply. The International Energy Agency previously forecast that supply would outstrip demand by an average of three million barrels per day between October 2025 and the end of 2026. The actual additions are likely to be far more modest than the target suggests, however, as most members are already producing at or near full capacity.
As reported by Reuters, in March 2025, just before the group began unwinding its first layer of cuts, joint OPEC+ production reached 31.83 million barrels per day, about one million barrels per day below its 32.88 million barrels per day production target for September. Several OPEC+ members, notably Kazakhstan, the United Arab Emirates, and Iraq, had already exceeded their OPEC+ production quotas in. In July, they jointly outpaced their September quotas by about 500,000 barrels per day. For these members, the new targets will align with their realized output.
Lower prices due to OPEC+ increasing production are causing the U.S. oil industry to lay off workers and cut billions in spending. According to Reuters, ConocoPhillips – the third largest U.S. oil producer – is cutting up to 25% of its staff. Earlier, Chevron announced it would lay off 20% of its workforce, totaling roughly 8,000 people. Oilfield service company SLB is also reducing its workforce, as is Halliburton. Twenty-two public U.S. producers, including Occidental Petroleum Corp, ConocoPhillips, and Diamondback Energy, are cutting their capital expenditures by $2 billion. According to Baker Hughes, the U.S. oil rig count, which is an indicator of drilling activity needed for future production increases, has dropped by 69 to 414. The market needs oil prices to consistently trade around $70 to $75 a barrel to activate rigs, particularly for shale producers.
The Energy Information Administration is forecasting a drop in U.S. oil production for next year, with production expected to be 13.3 million barrels per day in 2026, a reduction from 13.44 million barrels per day this year, in its September Short-Term Energy Outlook.
Analysis
President Trump is using tariffs to target India and China for their imports of Russian oil. While it’s unclear what the ultimate effect of these tariffs will be on China, they have the potential for greater impact on India, as indicated by an estimate that the increased tariff could lower India’s GDP by 0.5%, because of its trade relationship with the United States. Since these tariffs have the effect of raising the price of Russian oil, it’s likely that India will shift to other sources over time. This move could raise the price of oil; however, when taken in tandem with OPEC+’s production increases, it’s more likely that oil prices will continue to remain low.
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