KEY POINTS
- New U.S. sanctions target Russian oil producers and shipping.
- China and India to increase imports from Middle East and Americas.
- Rising crude prices and freight costs strain global oil markets.
New U.S. sanctions imposed on Russian oil producers Gazprom Neft and Surgutneftegas, alongside 183 oil tankers, are expected to disrupt Moscow’s crude exports to its top buyers, China and India.
The measures, part of broader efforts to curb Russia’s revenues amid its conflict in Ukraine, will force refiners in these nations to seek alternative sources of crude, likely from the Middle East, Africa, and the Americas.
Analysts predict a significant reduction in the fleet of tankers available to ship Russian oil, which handled about 42 percent of the country’s total seaborne crude exports in 2024.
“Freight rates are expected to spike, and Chinese independent refiners may need to cut operations due to supply disruptions,” said industry sources.
China and India brace for rising crude prices
Both China and India, major consumers of Russian crude, face mounting challenges as supplies tighten.
According to Reuters, India’s imports of Russian oil accounted for 36 percent of its total imports last year, while China heavily relied on Russian ESPO Blend crude, often purchased above the price cap.
With sanctions biting, spot prices for Middle Eastern and African crude have already begun to rise.
An Indian refinery official noted, “We have no option but to pivot toward Middle Eastern and possibly U.S. oil.” The higher costs are set to strain global oil markets further, driving up freight and spot crude prices.
Market reactions and global shifts in oil trade
The sanctions come at a time when global oil dynamics are already strained. Industry experts suggest that Indian refiners will scramble for alternatives in the Middle East and Atlantic Basin.
The Dubai benchmark is expected to strengthen as aggressive bidding for February-loading cargoes intensifies.
China, a key buyer of Russian and Iranian oil, is likely to maximize imports from the Trans-Mountain pipeline in Canada while increasing reliance on heavier Middle Eastern grades.
The long-term impact of these sanctions could reshape global oil trade, with significant shifts in supply chains and pricing structures.
