Trump Sanctions on Russia's Oil Majors May Not End Indian and Chinese Crude Purchases

US sanctions against Russia's leading oil corporations, Rosneft and Lukoil, may not prompt India and China to stop buying Russian crude oil entirely, despite short-term disruptions. The sanctions mark the first Ukraine-related sanctions actions on Russian energy entities during Trump's second term. According to Kpler, a global real-time data and analytics provider, India and China may experience crude inventory depletion and potential refinery operational adjustments in the upcoming weeks due to short-term reductions. However, given their combined Russian seaborne crude imports of 2.7-2.8 mbd, complete substitution remains improbable.

Key Takeaways:

• The US sanctions on Rosneft and Lukoil, which collectively generate over 5 mbd of crude oil and condensate, are expected to create an immediate, brief interruption in Russian crude exports.
• Indian and Chinese refiners are assessing bills of lading for Russian oil shipments arriving after November 21, when the wind-down period concludes, and are conducting internal risk evaluations regarding transactions with sanctioned Russian companies.
• Term-contracted buyers like Reliance and PetroChina are expected to temporarily decrease their purchases from sanctioned Russian suppliers Rosneft and Lukoil.
• US sanctions specifically target Russian suppliers rather than the oil itself, allowing non-sanctioned entities to maintain supply.
• Indian oil refiners are likely to continue purchasing Russian crude oil, with the primary supplier Rosneft functioning as an aggregator rather than a direct producer.
• The sanctions are expected to trigger short-term hiccups as buyers reassess their risk tolerance, but a major disruption to Russian crude exports appears unlikely.

Statistics:

• 2.7-2.8 mbd: Combined Russian seaborne crude imports of India and China.
• 5 mbd: Collective crude oil and condensate generation of Rosneft and Lukoil.
• 5.2 mbd: Russia's expected crude processing through November-December.
• 5.4-5.6 mbd: Russian crude processing recorded at the same time last year.
• 800 kbd: Domestic oilfield supply and Russian pipeline crude usage by PetroChina's facilities in northeastern and northwestern China.

Sources:

• Kpler: A global real-time data and analytics provider.
• Bloomberg: A news and financial media company.
• TOI: A Indian news organization.
• European Union, UK, and US: Official statements regarding crude oil imports from Russia.