Russian oil prices have plummeted significantly as refiners in India and China have reduced their intake ahead of a U.S. sanctions deadline targeting state-owned companies Rosneft and Lukoil.
At the end of last week, the price of Urals crude, which is Russia’s primary export blend, dropped to $36.61 per barrel for shipments leaving Novorossiysk, according to Bloomberg’s report on Monday, which cited data from Argus Media.
The discount for Urals compared to the North Sea benchmark Brent expanded to $23.51 per barrel, marking the steepest decline since March 2023.
Previously, Urals was traded with a discount of $12-13, but this gap has now nearly doubled, approaching the early 2023 record of $40.
The sell-off has accelerated as the November 21 deadline approaches, by which all transactions involving Rosneft and Lukoil must be discontinued.
Several prominent Indian refiners—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 imported around 1 million barrels per day of Russian crude.
Chinese state-owned refiners Sinopec and PetroChina, along with smaller private refiners, have also stopped making direct purchases.
As reported by Rystad Energy and cited by Bloomberg earlier this month, this “buyer strike” has influenced approximately 45% of Russian oil exports to China.
The rapid decline in demand has left Russian suppliers with increasing amounts of oil sitting on ships.
JPMorgan estimates that roughly one-third of Russia’s maritime exports, amounting to about 1.4 million barrels per day, are currently being stored on tankers used as floating storage.
“Russia’s oil export landscape is entering a new stage of upheaval as sanctions against Rosneft and Lukoil are set to be enforced, leading the country’s two largest consumers, India and China, to dramatically cut their December orders,” wrote analysts from JPMorgan.
The Kremlin is preparing for yet another blow to its budget revenues, which have already decreased by over 20% this year, as Bloomberg reported in September.
Rosneft and Lukoil contribute to around half of Russia’s crude exports, totaling 2.2 million barrels per day. Including Surgutneftegaz and Gazprom Neft, which are already under U.S. sanctions, about 70% of Russia’s export volumes are now impacted.
