Russian Oil Hits the Wall

India and China stop new orders

On January 10th, 2024, the US administration under President Biden sanctioned 183 oil tankers that Russia used to ship oil globally, exceeding the $60 per barrel price cap imposed by the West.

In the hours following the sanctions announcement, ports in China and India requested the sanctioned oil tankers not to enter. Some were anchored a few kilometers from the port, while others returned to their origins. Mass confusion ensued. Subsequently, a brief waiver was issued, allowing these sanctioned vessels loaded with oil to offload their barrels by February 27th. All related financial transactions needed to be completed by March 12th.

This move allowed the oil markets to adjust to the new reality. Millions of barrels of Russian oil were not pulled from the market; the tankers transporting them above the western price cap were. However, 183 vessels represent a significant portion of the global tanker capacity — 10%. This increased the demand for non-sanctioned vessels, which, in turn, raised the price of these tankers and subsequently the price of crude oil. We are witnessing a price increase in the oil market due to higher demand for non-sanctioned oil tankers.

It appears that the Russians have still not decided whether to ship crude oil below the price cap. If they had…