-924c3c302c27387e19f6c44aaeb98745.png "Maryna Kulakova")
China and India have suspended their trade in Russian oil as US sanctions have triggered a sharp increase in tanker freight rates, Reuters reported on January 28.
According to traders and shipping companies, the trade in Russian oil loaded in March has stalled in Asia due to a significant price gap between buyers and sellers in China. This price disparity emerged after freight costs for tankers unaffected by US sanctions soared.
On January 10, the US imposed new sanctions targeting Russia’s oil supply chain, leading to a sharp rise in tanker charter rates. As a result, buyers and ports in China and India have avoided using sanctioned vessels.
Offers for Russian ESPO Blend crude, exported from the Pacific port of Kozmino, climbed to a premium of $3–5 per barrel over ICE Brent crude on a delivered ex-ship (DES) basis to China. This increase followed a multi-million-dollar spike in freight rates for Aframax tankers on this route, according to three traders.
Before the sanctions, strong winter demand and rising prices for competing Iranian crude had pushed spot premiums for ESPO Blend in China to nearly $2 per barrel—the highest since the start of Russia’s full-scale invasion of Ukraine, which had initially driven ESPO discounts to as much as $6 per barrel.
Last week, the Chief Financial Officer of Bharat Petroleum Corp Ltd in India told Reuters that the company had not received any new offers for March deliveries, unlike previous months. The company expects the number of March cargoes to decline compared to January and December levels.
In 2023, Russian crude imports accounted for 36% of India’s oil imports, while nearly 20% of the total went to China.
According to analytics firm Kpler, the recent sanctions target tankers that transport about 42% of Russia’s seaborne oil exports, primarily destined for China. However, sanctioned tankers have been gradually unloading cargo in China and India under a waiver period provided by the sanctions.
The US has informed India that tankers carrying Russian oil must offload their cargo by February 27 to comply with the sanctions. Payments for oil aboard sanctioned vessels must be completed by March 12, Indian Oil Minister Pankaj Jain told reporters on Friday.
