Russian Oil Prices Plummet as Major Buyers India and China Withdraw Ahead of Sanctions Deadline

Russian crude oil prices have experienced a significant decline as refineries in India and China have reduced their purchases in anticipation of a U.S. sanctions deadline that targets state-owned producers Rosneft and Lukoil.

According to Bloomberg, citing Argus Media, the price of Urals crude, which is Russia’s primary export grade, dropped to $36.61 per barrel at the close of last week for shipments departing from Novorossiysk.

The discount for Urals relative to the North Sea benchmark Brent increased to $23.51 per barrel, marking the highest difference since March 2023.

Historically, Urals traded at a discount of $12-13 before the latest U.S. sanctions were announced. This discrepancy has nearly doubled and is nearing the early 2023 record of $40.

The pressure on prices has intensified as the Nov. 21 deadline approaches, by which all dealings involving Rosneft and Lukoil must be concluded.

Several prominent Indian refiners — including Reliance Industries, Bharat Petroleum, Hindustan Petroleum, Mangalore Refinery and Petrochemicals, and HPCL-Mittal Energy — have already ceased direct purchases from these two firms, which previously accounted for approximately 1 million barrels per day of Russian crude.

Chinese state-run refiners, such as Sinopec and PetroChina, alongside smaller privately-owned facilities, have also suspended their direct acquisitions.

This «buyer strike» has impacted nearly 45% of Russian oil shipments to China, as reported by Rystad Energy and mentioned by Bloomberg earlier this month.

The sharp decrease in demand has resulted in Russian suppliers being left with increasing amounts of oil on tankers that are now serving as floating storage.

JPMorgan estimates that about one-third of Russia’s seaborne oil exports, approximately 1.4 million barrels per day, are currently idle on tankers.

“Russia’s oil exports are entering a new era of disruption as sanctions against Rosneft and Lukoil loom, leading to significant reductions in December purchases from its largest clients, India and China,” JPMorgan analysts stated.

The Kremlin is preparing for further declines in budget revenues, which have already dropped more than 20% this year, according to Bloomberg’s report in September.

Rosneft and Lukoil account for nearly half of Russia’s crude exports at 2.2 million barrels per day. When including Surgutneftegaz and Gazprom Neft, which are also subjected to U.S. sanctions, approximately 70% of Russia’s export volumes are now impacted.