New U.S. sanctions targeting Russian oil producers and shipping vessels are set to disrupt the supply of Russian oil to China and India. These sanctions, which affect key players like Gazprom Neft, Surgutneftegas, and 183 oil tankers that transported Russian crude, aim to limit Moscow’s financial ability to fund its war in Ukraine. As a result, Chinese and Indian refiners are expected to turn to alternative oil supplies from the Middle East, Africa, and the Americas, leading to a rise in oil prices and freight costs.
The sanctions are particularly impactful because many of the affected vessels have been transporting oil to China and India, with about 530 million barrels of Russian crude, including significant portions of the ESPO Blend and Urals oil, being delivered last year. This change is expected to significantly reduce the fleet of vessels available to deliver Russian oil, causing a drop in supply and a corresponding spike in oil prices.
Both India and China have historically relied heavily on Russian oil, with India importing 1.764 million barrels per day (bpd) in 2023, accounting for 36% of its total oil imports, and China’s imports of Russian oil also comprising a substantial share. However, with these sanctions, China and India will need to turn to other regions, particularly the Middle East, for their oil supply.
The disruption of Russian oil exports is already driving up the cost of oil from alternative sources. As a result, refiners in India and China are bracing for increased prices and competition for supplies, potentially leading to tighter global oil markets.
This shift in supply chains is expected to change the landscape of global oil trade and may impact the pricing dynamics in the Middle East and Atlantic Basin as refiners seek alternatives to Russian crude.
