Crude oil to see short-term bullish momentum; check strategy, key levels

Fresh Sanction on Russia could see oil prices higher in short term 

Global crude oil prices rebounded sharply this week, with WTI up 8 per cent , (but still holding down by 15 per cent through the year) following fresh US sanctions on Russian energy giants Rosneft and Lukoil, building on Britain’s sanctions last week. The measures could disrupt 1 mb/d of Russian supply short-term, tightening the market despite a 0.5 mb/d surplus. Brent also rose, reflecting heightened geopolitical risks and reduced export capacity, driving a significant price recovery amid global energy market volatility.

Impact of fresh sanction global energy market

Western countries, led by the US and its allies, aim to cripple Russia’s economy, which relies on crude oil for 30 per cent of its GDP, through fresh sanctions on Rosneft and Lukoil. Rosneft, producing 40 per cent of Russia’s oil output (3.5 mb/d), faces immediate cash flow disruptions, while Lukoil (10 per cent share, 0.9 mb/d) and Rosneft, dependent on Western shipping, could see combined exports drop by 1–1.5 mb/d. This forces reliance on costly shadow fleets, raising costs by 15–20 per cent per barrel.  Russia’s oil-dependent economy risks annual revenue losses of $20–30 billion, with production potentially falling 5–10 per cent short-term due to supply chain halts. The sanctions could reduce Russian exports by 1 mb/d, offsetting OPEC+’s 2.72 mb/d restoration and shrinking the global surplus easing global surplus pressures at 0.5 mb/d.

Asian buyers may dessert Russian oil

Fresh sanctions on Russia, targeting Rosneft and Lukoil, could raise Russian oil prices by 15–20 per cent, prompting India and China to seek discounted alternatives from producers without secondary sanction fears.  As of September 2025, India and China remain Russia's largest buyers, importing ~3.7 mb/d YTD, representing 25 per cent of Russia's total exports (14.8 mb/d). Russia holds a 34 per cent share in India’s imports, but Q2 volumes dipped due to US tariff threats (50 per cent on Russian oil buyers). This shift may redirect demand to sources like the Middle East and US.

US Oil production adding to supply glut

The US Permian Basin remains the powerhouse with 48 per cent of total US production, pumping 6.6 million bpd in 2025, up 430,000 bpd from 2023, while output from Gulf of Mexico production is around 14 per cent of total US output is forecast at 1.85 million bpd in 2025, up 2.8 per cent from 1.8 million bpd in 2024.  EIA forecasts US production peaking at 13.7 million bpd in 2025 before stabilising at 13.6 million bpd in 2026.On the other hand OPEC+ output restoration is reaching 2.72mbpd by November, which is already threatening the global market of surplus of 1mbpd by end of 2025.

Macro development

The Trump administration is considering broad curbs on software exports to China, including laptops and jet engines, as retaliation for Beijing's rare earth export bans announced October 9. This could upend global production chains, affecting US firms like Apple and Boeing. Beijing warned of "countermeasures" against US tariffs, including port fees on American vessels and sanctions on South Korean firms like Hanwha Ocean.  Trump's 100 per cent tariff threat and China's countermeasures risk a deeper rift, potentially disrupting supply chains for semiconductors and rare earths. China-US trade relations remain tense but show signs of diplomatic engagement, with working-level talks underway in Malaysia amid escalating tariff and sanction threats. A Xi-Trump summit could yield a truce extension, but failure may trigger tariffs in November, impacting global growth.

Outlook

The fresh sanctions on Russia are expected to sustain bullish short-term momentum in crude oil, potentially derailing 1 mb/d from supply chains, offsetting increased OPEC+ production (2.72 mb/d) and easing glut fears (0.5 mb/d surplus). Oil prices are projected to trade in a broader $58–$64 range in the coming weeks, with markets closely watching the Xi-Trump summit next week (October 30, 2025) for trade and energy policy cues.

 

(Disclaimer: Mohammed Imran is a research analyst at Mirae Asset Sharekhan. Views expressed are his own.)