A significant accumulation of crude oil on the world’s oceans, totaling about a billion barrels, includes a notably high volume from countries facing sanctions. This trend indicates that these measures are disrupting the oil trade.
Since the end of August, approximately 40% of the increase in oil on tankers is attributed to crude from Russia, Iran, Venezuela, or of uncertain origin, based on vessel-tracking data from Vortexa, Kpler, and OilX. Even at the lowest estimate of around 20%, this constitutes a larger share of global crude production than these three nations typically supply.
This buildup in crude does not imply that the oil will go unsold; however, it poses a threat to the revenue streams of sanctioned oil-producing states, with potential repercussions for a global oil market projected to face oversupply. While increased production is a contributing factor, the situation also reflects difficulties in discharging oil from tankers. Concurrently, the inflow of unsanctioned supplies has surged.
Traders caution that the resolution of this stored oil will significantly influence oil price movements in the coming months. The latest Western sanctions are causing a reshuffling of crude flows, impacting major importers such as India and China, and pushing daily shipping costs temporarily above $100,000 due to a stretched tanker fleet.
According to analysts at Clarksons Securities, including Frode Morkedal, stricter Western sanctions have resulted in Russian oil being stranded on ships and unable to discharge, with previous buyers now sourcing replacements from the Middle East and the Atlantic.
A Bloomberg analysis highlights that Russian supplies dominate the buildup of restricted oil. In recent weeks, Russian seaborne shipments have increased as the country raises production following earlier cuts in tandem with OPEC+ partners. Additionally, some crude is likely being redirected to export terminals due to Ukrainian incursions impacting Moscow’s oil infrastructure, particularly its refineries.
The substantial clampdown by the West on Russian oil buyers is complicating the trading of cargoes, with Indian refineries reportedly opting not to take new shipments, and indications that China may also be reluctant to fill the gap. U.S. sanctions against Russia’s leading oil producers, Rosneft PJSC and Lukoil PJSC, have exacerbated trading challenges.
Russia’s oil-related tax revenues declined by over 24% year-on-year last month, based on data from its Finance Ministry analyzed by Bloomberg. The Russian government anticipates that oil and gas budget revenues this year will be the lowest since the onset of the COVID-19 pandemic in 2020.
On the other hand, Iranian shipments have surged, reaching a seven-year high in October, coinciding with U.S. sanctions against a major Chinese terminal engaged in purchasing barrels that support the Iranian regime.
OilX, a division of the consulting firm Energy Aspects, reports that its oil-on-water data includes confirmed shipments, factoring in delays often associated with dark fleet activities from nations like Iran and Venezuela. This data may be subject to upward revision. Vortexa has noted that its numbers can initially overstate volumes but tend to be adjusted downward as ships discharge. The current circumstances are described as far from normal.
While sanctioned crude on tankers has significantly increased, there is also a rise in non-sanctioned oil. OilX data indicate that since late August, the largest contributor to this increase has been Saudi Arabia, followed closely by the U.S. and Russia.
Saudi Arabia exported oil at its highest rate in two and a half years last month, as it seeks to regain market share lost during years of OPEC output cuts. Additionally, U.S. crude volumes at sea have increased, following their highest average monthly levels since July 2024, after Asian processors bought U.S. cargoes last summer when Middle Eastern prices surged, creating an arbitrage opportunity.
However, oil from sanctioned nations accounts for a more substantial share of the recent increase compared to their collective contribution to global crude production, which stands around 17%, according to OilX.
“There’s a considerable amount of crude on the water currently,” stated Brian Mandell, executive vice president of marketing and commercial at Phillips 66, during an earnings call late last month. “We’re awaiting clarity on what those crudes are.”
