Oil Prices Surge as US Sanctions on Russia Rattle Global Crude Flows
Key Asian importers pause seaborne purchases, forcing a realignment of energy trade routes and tightening near-term supply concerns.
Global oil prices saw their sharpest single-day climb in months this past week after new U.S. sanctions targeting Russia’s top energy firms prompted key buyers in China and India to temporarily halt seaborne imports. Brent crude, the international benchmark, surged by 6% to hit $66 per barrel as the measures threatened to disrupt a major artery of the global energy trade.
The rally was triggered by Washington's move to impose significant sanctions on Russian energy giants Rosneft and Lukoil, set to take full effect on November 21. The policy represents one of the most direct actions taken against Russia's energy sector, aiming to curtail the Kremlin's fossil fuel revenues which have remained resilient despite previous restrictions. According to analysis from the Atlantic Council, the sanctions are designed to create significant compliance challenges for entities dealing with these Russian firms.
Following the announcement, major state-owned refineries in China and India, two of the largest buyers of Russian seaborne crude since 2022, immediately paused new orders. This sudden withdrawal from the market sparked fears of a supply crunch, forcing the world's second and third-largest oil importers to seek alternative barrels from the Middle East, West Africa, and the Americas.
However, the market's initial panic has begun to subside as the complexities of the situation become clearer. By the end of the week, Brent crude had settled lower, trading around $65.07 a barrel. The retreat came as traders assessed the sanctions' practical impact, noting that around 900,000 barrels per day of Russian crude supplied to China via pipelines remain unaffected. Furthermore, reports from The Moscow Times indicated that India's top refiner, Indian Oil Corp, had already resumed purchasing Russian crude for December delivery from suppliers not explicitly named in the sanctions.
This rerouting of energy flows is already visible in trade data. In a sign of shifting alliances, India's imports of U.S. crude surged to a three-year high in October, a trend likely to accelerate as Indian refiners diversify their sources to ensure supply security. While the long-term effectiveness of the sanctions remains to be seen, they have introduced a new layer of risk and uncertainty into the energy market.
Analysts believe that while a complete halt of Russian oil exports is unlikely, the sanctions will succeed in making transactions more difficult and costly for Moscow. As reported by The Guardian, Russia's monthly fossil fuel export revenues had already declined by 4% to their lowest point since the full-scale invasion of Ukraine. Market participants will now closely watch for OPEC+'s response and how fluidly global crude supply chains can adapt to this latest geopolitical shock.