US Sanctions Trigger Sharp Drop in Russian Oil Shipments, India and China Pause Purchases

US sanctions targeting Russia's major oil exporters, including Rosneft PJSC and Lukoil PJSC, have led to a sharp fall in Russian seaborne crude oil shipments, marking the most significant decline since January 2024. Key buyers such as refiners in China, India, and Turkey, which collectively account for over 95% of Russia's seaborne crude exports, are pausing purchases and looking for alternative supplies. This hesitancy has resulted in a substantial increase in Russian crude being held on tankers at sea, known as floating storage, as cargo discharges are hit harder than loadings.

Russia's oil revenue has fallen to its lowest point since August. The sanctions extend to its four biggest crude exporters, raising concerns about global oil supplies and potentially tightening future market gluts. Several large Indian oil refiners, who have been importing nearly one million barrels per day of Russian crude, are halting purchases, expecting deliveries to be affected from December onwards. Chinese processors like Sinopec and PetroChina have also canceled some cargoes, impacting up to 45% of China's Russian crude imports. Turkish refiners are similarly cutting back.

Some industry leaders believe the disruption might be temporary, with Russian oil eventually finding its way to the market. Meanwhile, Russia's crude processing continues, though drone attacks may affect it.

Impact: This news directly impacts the global energy market by altering supply dynamics and potentially influencing crude oil prices. For India, it means Indian refiners must secure alternative crude supplies, which could affect their procurement costs and operational strategies. The uncertainty surrounding Russian oil flows can lead to price volatility, impacting the broader Indian economy and its balance of payments. Rating: 7/10.

Difficult Terms: * Seaborne crude shipments: Crude oil that is transported by sea using large ships called tankers. * US sanctions: Restrictions imposed by the United States government to penalize a country, entity, or individual, often aimed at influencing their policies or actions. In this context, they target Russia's oil trade to limit its revenue. * Cargoes: A load of goods being transported, typically by ship, plane, or truck. Here, it refers to shipments of crude oil. * Refiners: Industrial facilities that process crude oil into various petroleum products such as gasoline, diesel, jet fuel, and lubricants. * Floating storage: When oil is stored on ships at sea for extended periods instead of being delivered to land-based storage or refineries. This often occurs when there is excess supply or buyers are hesitant. * Price cap: A maximum price set by a coalition of countries (like the G-7) for Russian oil. If Russian oil is sold above this cap, countries participating in the cap may restrict services like shipping and insurance, aiming to reduce Russia's export revenue while keeping oil flowing to the market. * ESPO grade: A specific type of Russian crude oil, named after the Eastern Siberia-Pacific Ocean pipeline, commonly exported to Asian markets, particularly China.