Russian Crude Refining Surges Amid Fresh U.S. Sanctions

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Russian Crude Refining Surges Amid Fresh U.S. Sanctions

Russian oil refineries are ramping up crude processing to sustain fuel exports following new U.S. sanctions targeting the country’s energy sector. The Biden administration recently imposed sanctions on Surgutneftgas and Gazprom Neft, two key Russian oil firms responsible for 25% of the nation’s crude exports. Together, they shipped an average of 970,000 barrels per day in 2024.

A Russian industry source confirmed the strategic shift, stating, “We have to utilize oil processing as much as we can in order to use the sanctioned oil.”

The sanctions have disrupted Russia’s crude trade, with middlemen ceasing cargo offerings. According to Bharat Petroleum’s Chief Financial Officer, Vetsa Ramakrishna Gupta, Indian state refiners—who rely on the spot market for Russian crude—are experiencing delays.

“We have not received any new offers for the March delivery window. Traders are asking us to wait. We are waiting to get offers,” Gupta told Reuters. He added that cargo availability in the coming months is expected to decline compared to December and January levels.

Market Implications and Oil Price Outlook

Commodity analysts at Standard Chartered predict that the oil market’s early-year strength will continue, fueled in part by the removal of Russian barrels from global supply. The latest U.S. restrictions have tripled the number of directly sanctioned Russian crude tankers, affecting approximately 900,000 barrels per day. While Russia is expected to counteract these measures with more shadow fleet tankers and ship-to-ship transfers, StanChart forecasts a net displacement of 500,000 barrels per day over the next six months.

Beyond sanctions, the firm highlights additional factors supporting strong oil prices:

OPEC+ Compliance – The cartel has largely adhered to its production quotas.
Stronger Demand – Consumption is exceeding previous forecasts.
Lower Non-OPEC Supply Growth – Non-OPEC output is rising at a slower-than-expected pace.

Last month, Standard Chartered analysts argued that OPEC+’s decision to delay its planned production hike to April 2025 and extend full production cuts until 2026 will prevent an oversupplied market next year.

With these dynamics at play, oil prices are expected to remain firm, barring major shifts in geopolitical or market conditions.