Recent US sanctions on the Russian energy sector have caused shipping costs for Russian oil to rise by 25%, while buyers – particularly in India and China – seek alternative sources of oil, according to trade sources and market analysis.
Three trade sources told Reuters that shipping prices for Russian oil from ports in western Russia to India rose 25% after Washington imposed sanctions on 183 ships carrying Russian energy exports last week.
The sources explained that the cost of an Aframax tanker trip from Russian ports on the Baltic Sea to India increased to between 6 and 6.3 million dollars per trip, compared to between 4.7 and 4.9 million dollars a week ago.
The cost of shipping from the Russian port of Novorossiysk on the Black Sea to India via Suez Max tankers has also risen to $5.5 million per trip.
The impact of sanctions on oil markets
Despite the decline in oil prices at settlement yesterday, Friday, the new US sanctions contributed to achieving gains for the fourth week in a row. Brent crude futures fell by 50 cents (0.6%) to reach $80.79 per barrel, but recorded weekly gains of 1.3%.
US West Texas Intermediate crude also fell by 80 cents (1%) to $77.88 per barrel, despite rising by 1.7% during the week.
Phil Flynn, chief analyst at Price Futures Group, said: “The sanctions imposed on Russia are causing a reduction in supplies in Europe, India and China.”
For his part, Scott Besent, nominee for Treasury Secretary in the administration of President-elect Donald Trump, told Bloomberg that sanctions on the Russian oil sector may be tightened in the future, which may contribute to further supply disruptions.
Carriers decline and buyers shift
According to a Bloomberg report, the sanctions imposed on January 10 by the US Office of Foreign Assets Control (OFAC) included 161 oil tankers estimated to have transported about 1.4 million barrels per day of Russian oil, which is equivalent to approximately 50%. Of Russia’s maritime exports.
The recent US sanctions targeted the two Russian oil companies, Gazprom Neft and Surgut Oil and Gas, in addition to Russian oil tankers.
These sanctions come as part of efforts to reduce the revenues that Moscow uses to finance the war with Ukraine.
According to data compiled by Bloomberg, some ships have stopped moving, while others have changed course away from Russian ports, reflecting the immediate impact of the sanctions.
“There will likely be sustained market turmoil, and we may see a significant decline in Russian oil exports,” Edward Fishman, a researcher at Columbia University, told the agency.
India and China are looking for alternatives
Bloomberg said that as the sanctions worsened, both India and China headed to Middle Eastern countries, such as Saudi Arabia, Iraq, the Emirates, and Kuwait, to search for alternative supplies, but these countries are linked to the OPEC Plus agreements that impose restrictions on production, which makes finding additional quantities difficult.
Trade sources indicated that state-owned refineries in India and China are now requesting immediate shipments to cover their needs, especially after New Delhi’s decision to ban receiving any tanker listed under US sanctions after last March 12.
Potential impact on markets
According to Macquarie Financial Group, the sanctions could lead to a loss of up to 2.15 million barrels per day of Russian oil exports, a number more than three times the global supply surplus expected for 2025, according to the International Energy Agency.
In light of these developments, investors are closely monitoring developments, especially in light of speculation that the Trump administration may reconsider some of the sanctions, but Besant confirmed before the US Senate that he would support tightening sanctions on Russian oil companies if he was appointed Secretary of the Treasury.
In light of the severe sanctions and the impact on Russian oil exports, global markets are preparing for more volatility, and with buyers searching for alternatives and the continued imposition of sanctions, the repercussions on supplies and prices remain open to multiple scenarios in the coming months.
