Sanctions Scare Asian Buyers Away Sending Russian Oil Revenues to New Lows

Russia’s weekly oil earnings have dropped to a three-year low as major Asian buyers pull back amidst strict new US sanctions and falling prices.

Revenue Hits a Record Low

Russia’s weekly oil export revenues have dropped significantly. They are now at their lowest point in almost three years. Deep discounts and a retreat by key Asian customers are hurting the market. Russia earned an average of $1.22 billion per week recently. This data covers the four weeks leading to November 16. Bloomberg reported on Tuesday that this is the weakest level since March 2023. This marks a sharp 20% drop from late October. Back then, weekly revenues were around $1.48 billion.

Crude Prices Crash

This slump happens as prices for Urals, Russia’s main export grade, have plunged. The grade traded as low as $36 a barrel last week. Discounts against the Brent benchmark widened to $23. This is the steepest gap seen in two and a half years.

Sanctions Impact Supply

U.S. sanctions on Rosneft and Lukoil are causing major issues. These companies control nearly half of Russia’s oil production. These sanctions put two-thirds of supplies to India and China at risk. Together, these nations buy 90% of Russia’s seaborne crude exports.

Buyers Back Away

Refiners in China have cut December purchases of Russian oil significantly. They reduced orders by two-thirds ahead of full U.S. sanctions enforcement. Bloomberg reported this citing Rystad Energy estimates. Indian demand has fallen in a similar way. The country’s five largest refiners have stopped buying Russian-origin barrels.

Tankers Left Waiting

Tankers are still loading at Russian ports daily. About 3.29 million barrels per day were loaded in the week to Nov. 16. However, an increasing share of that crude has no destination. JPMorgan estimates that roughly a third of Russia’s oil exports are sitting idle. Around 1.4 million barrels per day are waiting in tankers for buyers.

Fear in the Market

The International Energy Agency warned last week about these sanctions. They stated that sanctions on Rosneft and Lukoil “may have the most far-reaching impact yet on global oil markets.” They added that this creates “considerable downside risk” for Russian production. Vandana Hari from Vanda Insights told Bloomberg about the fear in the market. She noted that this round of sanctions is different. “U.S. sanctions on Rosneft and Lukoil could be a little bit of a game-changer,” she said.