US sanctions against Russian oil halt billions at sea

The new sanctions may significantly disrupt Russian oil supplies, as the International Energy Agency (IEA) reported on Wednesday. According to Reuters calculations based on ship traffic data, at least 65 tankers transporting Russian oil were adrift by Monday following the US Treasury Department's announcement of sanctions on Friday.

Five of these tankers, carrying about 636,000 cubic metres, have stopped off the coast of China's Shandong province. Many independent refineries, which have been actively purchasing Far Eastern oil grades such as ESPO and Sokol, are located there. Seven more have anchored off the coast of Singapore, and dozens have stopped off the Russian coasts in the Baltic Sea and the Far East.

In total, oil corresponding to about 2.5 weeks of Russian exports is stuck at sea. Although the US has given two months to complete shipments already underway, not all buyers are prepared to accept the oil already sent, fearing the consequences of the sanctions.

In the week leading up to 12th January, 27 tankers with 3.36 million cubic metres of crude oil were loaded at Russian ports, compared to 28 tankers with 3.37 million cubic metres the previous week, according to ship tracking data analysed by Bloomberg. The average daily export in December was nearly 477,000 cubic metres. Therefore, the 65 tankers that stopped after the sanctions were imposed could carry about 8.4 million cubic metres over approximately 2.5 weeks.

In December, according to the Centre for Research on Energy and Clean Air, crude oil worth nearly £5 billion (at approximately £160 million per day) was exported. In the week leading up to 12th January, the value of maritime exports amounted to £1.2 billion, according to Bloomberg. Therefore, the value of the oil halted on the tankers, based on the latest data, could range from £2.7 to £2.9 billion.

The total number of the shadow fleet, transporting oil bypassing the sanctions, has been estimated by Lloyd’s List Intelligence at nearly 670 ships. Therefore, nearly 10 percent of the tankers were halted. In addition to the 180 ships already under sanctions, the US Treasury Department imposed new measures on another 183.

The IEA has not yet changed its forecast for Russia for January, citing "uncertain prospects" related to the impact of US sanctions on the market. "It is still too early to assess the potential effect of these new measures, but according to reports, some operators have already begun to withdraw from deliveries of Iranian and Russian oil," the agency stated.

Chinese companies are looking for solutions to the problem, Bloomberg reports. Although there is a period before the sanctions take effect during which oil can still be unloaded, many in Shandong are wary of accepting the oil. Even before Washington's decision, one of China's largest port operators, Shandong Port Group, announced that from 6th January, it would stop accepting ships blacklisted by the US Treasury Department.

Meanwhile, India has announced that it will allow tankers under sanctions, which were hired to transport oil before 10th January, to unload in its ports until 12th March — when the settlement period set by the US ends.

The US Treasury Department has imposed restrictions on 69 "Sovcomflot" ships, including 54 oil tankers and four LNG tankers.