UPDATE: Oil jumps by more than $1/bbl on fresh US sanctions on Russia
Nurluqman Suratman
13-Jan-2025
SINGAPORE (ICIS)–Oil prices surged by more than $1/barrel on Monday on supply disruption concerns following latest round of US sanctions against Russia’s energy sector.
- Russian supply to top purchasers India, China may be hit
- Oil gains in recent weeks partly driven by strong winter demand
- US may tighten sanctions on Iran oil exports under Trump
The new sanctions, imposed on 10 January, mark the US’ most sweeping measures yet, targeting companies and vessels engaged in Russia’s oil production and exports.
“The United States is taking sweeping action against Russia’s key source of revenue for funding its brutal and illegal war against Ukraine,” US treasury secretary Janet Yellen had said on 10 January.
“With today’s actions, we are ratcheting up the sanctions risk associated with Russia’s oil trade, including shipping and financial facilitation in support of Russia’s oil exports.”
The sanctions were imposed on 183 vessels, of which 143 are tankers, said Matt Wright, lead freight analyst at data and analytics firm France-based Kpler said in a note.
The tankers included are a combination of Russian-owned and “shadow fleet” vessels. The package of sanctions is the largest to target the Russian shipping market since the invasion in 2022, Wright said.
“Shadow fleet” refers to ships indirectly owned or controlled by Russia through shell companies or intermediaries to evade detection and sanctions.
The latest sanctions targeted 117 crude oil tankers, with 102 of them transported Russian crude to China and/or India at least once in 2024, and 11 exclusively moving arctic crude from oil fields to export terminals within Russia, according to Wright.
“When it comes to buyers, China and India, in general, tend to steer clear of dealing directly with tankers and entities blacklisted by the US Treasury,” he said.
China’s state-owned Shandong Port Group on 7 January issued a ban on vessels listed under the US Office of Foreign Assets Control (OFAC) from docking at its facilities – a precautionary step to avoid potential liabilities as President-elect Donald Trump prepares to return to the White House in just two weeks, Wright said.
In 2024, nearly half of China’s seaborne imports of Russian crude oil were sourced through the eastern province of Shandong, according to Wright.
Shandong province is home to a high concentration of independent small or “teapot” refineries, which play a significant role in oil imports of the world’s second-biggest economy.
“The new sanctions disrupting Russian oil exports are expected to drive up Russian crude price differentials in China and India in the short term, potentially reaching parity with non-sanctioned grades of similar quality,” he added.
India, which is a giant emerging market in Asia, has significantly increased imports of Russian oil since the Ukraine invasion, taking advantage of discounted prices and becoming one of the top buyers of Russian crude.
The newly sanctioned tankers handled over 530 million barrels of Russian crude exports last year, accounting for about 42% of Russia’s total seaborne crude exports, according to Kpler data.
Over half of this volume or around 300 million barrels was shipped to China, making up roughly 61% of China’s seaborne imports of Russian oil.
The bulk of the remaining volume went to India, accounting for nearly a third of the south Asian nation’s total intake of Russian oil, it said.
The US Department of State said that is also taking steps to reduce Russia’s energy revenues by blocking two active liquefied natural gas (LNG) projects, a large Russian oil project, and third-country entities supporting Russia’s energy exports.
Russia’s foreign ministry on 11 January denounced the US sanctions against its energy sector, saying that it would respond to the country’s “hostile” actions.
Crude prices have surged in recent weeks, driven by winter demand, falling US stockpiles, and speculation that the incoming Donald Trump administration in the US will tighten sanctions on Iranian oil exports.
Meanwhile, Texas refineries are bracing for an onslaught of cold, snow and freezing rain as the first major winter storm sweeps the southern region of the US, with January projected to be the coldest in 11 years.
Focus article by Nurluqman Suratman
(Updates with latest prices in interactive, adds details throughout)
Thumbnail image: A foreign oil tanker at Qingdao port in Shandong province, China, on 29 November 2024.(Costfoto/NurPhoto/Shutterstock)
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