US sanctions against Russian oil companies, set to take effect on Friday, could leave nearly 48 million barrels of oil stranded at sea, prompting dozens of tankers to seek alternative destinations, according to a Bloomberg report.
Last month, the Trump administration’s decision to blacklist oil majors Rosneft PJSC and Lukoil PJSC marked perhaps the most aggressive action yet against Russia, as the US president seeks to increase pressure on the Kremlin over the conflict in Ukraine.
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Pressure on Asian buyers
With restrictions now just hours away, Asian buyers are racing against time. Indian refiners are scrambling for spare supplies and booking oil tankers from the Middle East at a rate that has already pushed freight rates on the route to near five-year highs. Meanwhile, traders are carefully looking for alternative buyers, if any, for the Lukoil and Rosneft crude already offshore, the report said.
“Russian export flows are holding back, but not yet finding their way to their destinations,” Warren Patterson, head of commodity strategy at ING Groep NV, told the news portal. “If this continues and eventually it all backs up, we could start to see a decline in supply, which will worry the markets.”
The report cited data from analytics firm Kpler, which showed that nearly 48 million barrels of Rosneft and Lukoil crude, mainly Ural and ESPO grades, are currently in transit or being loaded. That includes about 50 tankers bound for China and India, as well as others without a destination or bound for smaller ports, spread across the Baltic Sea to the South China Sea, as intermediaries try to distance themselves from the trade.
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Russia, which wants to keep oil flowing, maintains significant sea shipments of around 3.4 million barrels per day, according to Bloomberg data.
It is noteworthy that not all of these barrels will necessarily find a market, not even in the largest Asian markets. Since Russia’s invasion of Ukraine in 2022, China and India have absorbed most of Russia’s exports and maintained strong ties with Moscow.
However, both countries are also wary of engaging in looming secondary sanctions as the US steps up its pressure on any entity that enables Russian exports. The extent of those restrictions and Washington’s willingness to enforce them will determine exactly how much oil reaches refineries, the report said.
“It’s painful, but it’s only painful for three or four months,” Adam Lanning, SSY’s chief tanker market analyst, told the news outlet. “What’s likely to happen in the coming months is, as we’ve seen, the markets will begin to adjust and find a way to import that oil without going out of control,” Lanning said.
