Russia's oil trade with China and India halts amid rising shipping costs


It’s the sanctions working, baby!

Russia’s oil trade to its largest Asian buyers, China and India, has slowed significantly for March-loading cargoes as U.S. sanctions have pushed shipping costs higher, creating a gap between buyer and seller expectations, traders and shipping data reveal.

Fresh sanctions imposed by Washington on 10 January, targeting Russia's oil supply chain, have led to a surge in tanker freight rates, Reuters learned. As a result, some buyers and ports in China and India have avoided sanctioned vessels, further disrupting trade.

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Offers for March shipments of Russian ESPO Blend crude from the Pacific port of Kozmino have risen to premiums of $3–$5 per barrel over ICE Brent on a delivered ex-ship (DES) basis to China.

The increase follows a sharp rise in freight costs for Aframax tankers, which have jumped by millions of dollars, according to three traders familiar with the grade.

Before the sanctions, strong winter demand and rising prices for rival Iranian grades pushed spot premiums for ESPO Blend crude to nearly $2 per barrel - its highest since the Ukraine war began in 2022. At that time, discounts for the grade had fallen as low as $6 per barrel.

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In India, Bharat Petroleum Corp Ltd reported no new offers for March delivery, deviating from typical monthly trends. Indian refiners usually receive Russian crude offers mid-month but now expect fewer cargoes in March compared to January and December.

Russia accounted for 36% of India’s and nearly 20% of China’s oil imports in 2024. The sanctions affect about 42% of Russia’s seaborne oil exports, predominantly destined for China, according to the report.

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