The recent U.S. sanctions against Russia have sent shockwaves through the global oil market, leading to a significant drop in Russia's seaborne oil exports. This decline marks the most substantial weekly decrease since January 2024, signaling a tangible impact on Russia's oil revenue. Let's delve into the details and explore the ramifications of these developments.
On October 22, the U.S. government imposed stringent blocking sanctions on Rosneft and Lukoil, two of Russia's largest oil companies. These sanctions freeze their U.S.-based assets and threaten secondary sanctions against any foreign entities that continue to trade with them. This move has clearly rattled the market.
According to reports, the four-week average volume of crude oil shipments from Russian ports plummeted to 3.58 million barrels per day as of November 2. This represents a decrease of 190,000 barrels from the period ending October 26, the steepest decline observed in the past 22 months.
During the week ending November 2, only 26 tankers loaded 21.11 million barrels of crude, a stark contrast to the 34 vessels that carried 26.41 million barrels the previous week. This translates to a daily average export of 3.02 million barrels, a 20% decrease from the prior week's 3.77 million barrels.
But here's where it gets controversial... A significant portion of the oil remains undelivered, resulting in tankers being utilized as floating storage facilities. Since early September, coinciding with the U.S. doubling tariffs on India, the amount of Russian oil stored at sea has surged by 8%, reaching over 380 million barrels. This is equivalent to over 100 days of exports.
And this is the part most people miss... India, China, and Turkey, which collectively account for approximately 95% of Russia's crude exports, have either paused or reduced their imports. They are seeking clarity on compliance risks. Some buyers are exploring smaller Russian suppliers not yet subject to sanctions, while others are actively seeking alternative sources.
Reliance Industries, India's largest private firm, has declared its adherence to U.S. sanctions and is shifting to crude from the Middle East, the U.S., and Brazil. Similarly, Indian Oil Corp, the country's biggest state-owned refiner, has ceased placing orders for Russian crude following the imposition of sanctions.
Furthermore, the sanctions coincide with Ukraine's intensified strikes on Russian oil infrastructure, further constricting output and exports. This dual impact has inadvertently benefited Western competitors. For instance, profits from refining operations among ExxonMobil, Chevron, Shell, and TotalEnergies rose by 61% in the third quarter compared to the previous quarter, contributing to a 20% increase in overall earnings.
Controversy & Comment Hooks: What are your thoughts on the impact of these sanctions? Do you believe they will effectively curb Russia's oil revenue, or will Russia find alternative markets? Share your opinions in the comments below!
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