US Sanctions Cause India, China, Turkey to Halt Russian Oil Imports, Causing Crude to Pile Up at Sea

Recent United States sanctions targeting Russian crude oil exporters, including Rosneft PJSC and Lukoil PJSC, are significantly impacting global trade. Major buyers of Russian crude, specifically India, China, and Turkey, which together account for over 95% of Russia's seaborne exports, are now showing reduced willingness to accept cargo. This hesitancy stems from concerns over US sanctions compliance.

As a result, Russian crude oil exports have seen a substantial decline, marking the steepest drop since January 2024. The discharge of cargo has decreased more than loading activities, leading to a large volume of Russian crude accumulating on vessels at sea, exceeding 380 million barrels. This growing 'floating storage' is considered a key indicator of the sanctions' effectiveness.

Impact on Buyers: Indian refineries, which typically purchase around 1 million barrels of Russian crude daily, are temporarily halting acquisitions, affecting anticipated deliveries in December and January. Chinese refineries, including state-controlled entities like Sinopec and PetroChina Co., have also withdrawn from some agreements, potentially impacting up to 400,000 barrels daily. Turkish refiners, ranked third globally in Russian crude imports, are reducing purchases and seeking supplies from other nations like Iraq, Libya, Saudi Arabia, and Kazakhstan.

Economic Effects: Moscow's oil revenue has dropped to its lowest point since August. The export prices for key Russian crudes like Urals and ESPO have decreased, with prices staying below the G-7 price cap of $60 per barrel for consecutive weeks.

Impact: The global oil supply could be affected by these restrictions. While some industry experts suggest that disrupted Russian oil will eventually find its way to the market, the immediate consequence is reduced availability for major importers and a financial setback for Russia. This may lead to adjustments in global supply chains and potential price volatility. The effectiveness of the sanctions is being closely monitored through the volume of oil held at sea.

Impact Rating: 8/10

Difficult Terms: * **Seaborne crude exports**: Oil transported via ships across oceans. * **Sanctions**: Penalties imposed by countries on other nations, often affecting trade or finance, to exert political pressure. * **Refineries**: Industrial facilities that process crude oil into usable products like gasoline and diesel. * **Cargo**: Goods or merchandise transported in bulk by ship, aircraft, or truck. * **Four-week average**: A calculation averaging data over a period of four weeks to identify underlying trends and smooth out short-term fluctuations. * **G-7 price cap**: A policy by Group of Seven (G7) nations and allies to limit the price of Russian oil exports, allowing imports only if purchased at or below a specified price level. * **Floating storage**: Using ships to temporarily store oil when land-based storage is insufficient or market conditions are unfavorable.