Oil markets are in constant flux today as tanker trading shrinks and Russia’s two largest oil buyers stop purchasing the fuel that has helped finance Moscow’s war in Ukraine for the past three and a half years.
In the last 24 hours, news has emerged that, following Donald Trump’s sanctions this week on Rosneft and Lukoil, for the first time, major Chinese oil players, including Sinopec, CNOOC, and PetroChina, have temporarily suspended seaborne purchases of Russian oil, not due to political alignment, but due to a compliance calculation, likely a recognition that exposure to secondary sanctions outweighs short-term gains.
Tanker tracking data in the coming days will reveal all
Splash reported yesterday that the US sanctions – designed to bring Russian President Vladimir Putin to the peace negotiating table – are already having effects. India is withdrawing from Russian oil imports.
China and India account for about three-quarters of all Russian seaborne crude exports.
Rosneft and Lukoil are Russia’s two largest oil producers, responsible for about half of Russia’s crude exports. With Gazprom Neft and Surgutneftegaz already sanctioned, virtually all Russian seaborne oil exporters are now under US sanctions.
Oil prices have risen since the news broke from Washington on Wednesday, while tanker FFAs for the remainder of the year have increased considerably.
Commenting on the sanctions, Jorge León, head of geopolitical analysis at Rystad Energy, said yesterday that, combined with the recent wave of attacks on Russian oil infrastructure, there is a real prospect of significant disruptions to Russian crude production and exports, increasing the risk of forced production shutdowns.
According to Kuwait’s Oil Minister, Tariq Al-Roumi, cited by Reuters on Thursday, OPEC is ready to counter any potential shortage in the oil market by reversing production cuts, as there are signs that demand is shifting towards the Gulf and Middle East region.
Tanker tracking data in the coming days will reveal how dramatically Trump’s first sanctions package against Russia since returning to power has reshaped global seaborne oil trade.
Russia’s seaborne exports have remained stable in the range of 3 to 3.5 million barrels per day since the start of the full-scale invasion of Ukraine in February 2022.
Estimates from Jefferies, an investment bank, suggest that between 30% and 40% of Russia’s seaborne crude exports are transported by compliant tankers, presumably below the G7 price cap, but the latest OFAC sanctions will likely make this difficult. Market players would be liable for sanctions if they support exports from Rosneft and Lukoil, even if the shipments are acquired below the price cap, currently set at $47.60 per barrel.
In general, Jefferies’ shipping experts, like many other tanker analysts, see Trump’s sanctions as positive for tankers, as they create greater potential for disruption and stretch the compliant tanker fleet even further.
The European Union yesterday ratified its long-awaited 19th sanctions package against Russia, targeting another 117 vessels and advancing the ban on Russian LNG imports by one year to 2027. The EU sanctions have specifically targeted Chinese importers, following the UK’s actions last week to sanction the Yulong refinery in Shandong. The UK had already sanctioned Rosneft and Lukoil last week.
India Russia United States
