The top buyers of Russian and Iranian crude in Asia, China, and India, have been buying more crude from the Middle East and Africa, expecting fresh sanctions on Iran and Russia to cripple supply from these two exporters, traders have told Bloomberg.
In the past few weeks, supply of Russian and Iranian crude has declined amid tighter Western sanctions, which have also driven up the prices of the oil from Iran and Russia.
Now China and India, the world’s largest and third-largest crude importer, respectively, anticipate further tightening of the sanctions on Iran from the incoming Trump Administration and imminent fresh sanctions on tankers transporting Russian oil from the outgoing Biden Administration.
Reduced supply of crude from Iran and Russia has prompted a rally in the prices of crude from the Middle East, where some grades have soared to rarely seen premiums over the global benchmark, Brent.
The prices of Oman and Dubai crude jumped to a rare premium over Brent in recent weeks, as demand for Middle Eastern oil has increased in China and India, key Iranian and Russian buyers.
Iran’s oil is increasingly finding its way into floating storage offshore Southeast Asia instead of at customers as a recent raft of U.S. sanctions on tankers shipping Iranian oil has made Chinese buyers more careful.
Russian supply has dwindled, too, with Russian crude oil exports by sea dropping as Moscow has been under increased pressure to fall in line with its OPEC+ quota as part of the group that looks to support oil prices. Increased sanctions pressure on Moscow’s “shadow fleet” of tankers has also played a role in reducing Russian shipments.
As a result of the expected lower supply from Iran and Russia, Indian refiners are buying spot cargoes from Abu Dhabi and Oman, while the Chinese buyers are purchasing more Abu Dhabi crude and oil from Angola, according to trade sources who spoke to Bloomberg.
