The ongoing Ukraine war ceasefire talks and the potential for new and even more extreme sanctions on Russian oil exports is keeping the outlook for the price of oil uncertain, Oxford Economics said in a note.

“The conflict between Russia and Ukraine continues to pose a significant risk to the global oil price forecast, with potential scenarios varying from increased sanctions to a complete reintroduction of Russian crude into the market,” Bridget Payne, Head of Energy Forecasting at Oxford Economics wrote.

The course of the war and sanctions remain the critical drivers of the Russian oil outlook. US President Donald Trump has threatened to impose harsh new sanctions as Russian President Vladimir Putin fails to heed his demands to start direct negotiations with Ukrainian President Volodymyr Zelenskiy, but so far the US president has failed to act.

Oxford Economics’ baseline scenario points to Urals crude prices falling to $50 per barrel by the end of 2025, down from around $63 in July, largely due to the European Union’s lower price cap and US tariff threats.

“Our baseline expectation is that new sanctions measures… exert downward pressure on the Russian oil price that will fall to $50 by end-2025. But we do not expect a material change to Brent given strong supply,” Payne said.

While volumes of Russian crude exports have remained resilient, sanctions have reshaped global flows. “Russian crude export volumes remain near pre-war levels, due to trade rerouting and the expansion of a shadow fleet of tankers operating outside conventional shipping channels,” Payne said.

Demand is supported by India, which has emerged as the largest buyer, alongside China, both purchasing crude at steep discounts. While Trump has threatened to hit both of these countries with 100% second sanctions tariffs if they keep buying crude, he let an August 15 deadline to comply slide. The White House did impose a 25% additional tariff on India, but a decision on whether to similarly hit Beijing was put off until November.

In the meantime, New Delhi has defied the White House and said it will continue to import Russian crude. Trump’s aggressive trade policy spurred many countries from the Global South to join China at the Shanghai Cooperation Organization (SCO) summit to coordinate their response to US bullying and another virtual summit is being organised by Brazilian President Luiz Inácio Lula da Silva under the umbrella of the BRICS bloc to address the same question.

In an effort to reduce the number of EU ships that are currently legally carrying Russian crude as members of the so-called shadow fleet – mostly Greek tankers, 20% of the total fleet – the EU introduced a new floating rate oil price sanctions cap of 15% below market rates for the Urals blend, Russia’s main export product that went into effect on September 3.

The EU has lowered its price cap from $60 to $47.60 with Western dominance in shipping and insurance markets expected to limit sales above the cap. However, the West remains reluctant to hit the Russian fleet too hard, afraid of spiking prices. No new energy sanctions are expected in the nineteenth sanctions package currently being prepared.

Nevertheless there are significant upside risks to prices if existing sanctions are more effectively enforced. “This scenario sees Urals prices fall to the $47.60 cap… lower prices would discourage drilling activity in Russia… Brent rising to around $80 per barrel in 2026 and the Urals discount widening to above $50,” Oxford Economics said.

Conversely, a ceasefire would unwind the sanctions premium, narrow the Urals discount and reduce the cost of Brent. “If a ceasefire was agreed and sanctions lifted… the Urals discount to Brent would narrow, eventually returning to its pre-war historical range below $2. Global crude prices would fall by approximately $5 compared with our baseline, with both Urals and Brent converging in the range of $56–$59 by 2028,” the consultancy noted.

“Sanctions have fundamentally altered market conditions,” Oxford Economics concluded. “The most likely outcome is moderately lower Urals prices and continued resilience in Russian export volumes, but geopolitical risks remain elevated.”