New Delhi, January 15, 2025: The price of crude oil in the international market has reached its highest level in four months. Brent crude is trading at $81 after a 4% increase, while WTI has neared $78. This surge in prices is attributed to new U.S. sanctions imposed on Russia. Experts believe that the biggest impact of these sanctions will be felt by India and China.
What Are the New Sanctions?
According to a Reuters report, the U.S. has imposed sanctions on two Russian oil production companies, Gazprom Neft and Surgutneftegaz. Additionally, restrictions have been placed on 183 vessels used to transport crude oil. Morgan Stanley reports that these vessels collectively carried an average of 1.5 million barrels of crude oil in 2024, much of which was supplied to India and China.
Crude Oil Imports in India
Of the 143 sanctioned vessels, they transported 530 million barrels of crude oil last year, accounting for 42% of Russia’s total seaborne oil exports. Out of this, 300 million barrels were sent to China, while a significant portion of the remaining oil reached India. Between January and November last year, India’s imports of Russian oil increased by 4.5%, averaging 1.7 million barrels per day. This accounted for 36% of India’s total oil imports.
What Will Be the Impact?
Sources indicate that due to the new sanctions, India will now have to rely more on supplies from the Gulf region, Africa, and the U.S. However, this poses a challenge because Russian oil was being imported into India at heavy discounts, whereas oil prices in the Middle East and Africa have already surged, making cheap alternatives less feasible. A senior official from an Indian refinery told Reuters that their only option now is to source oil from the Middle East or the U.S.
India’s Response
According to a report by ET, an Indian government official stated that these sanctions are unlikely to pose an immediate problem for the next two months. Oil supplies from Russia will continue for this period, as India can still receive oil from ships that departed Russia before January 10. However, India has temporarily halted new trade agreements for Russian crude oil.
Summary: Crude oil prices hit a 4-month high due to U.S. sanctions on Russian oil, impacting India and China as they face costlier alternative supplies.