US sanctions on Russia’s two largest oil companies have hit Russia’s seaborne crude oil exports hard. Exports dropped by 20% last week, falling to just over 3 million barrels per day. This is the lowest level in 10 weeks. The biggest declines came from ports in the Pacific and Arctic, while shipments from Baltic Sea and Black Sea ports saw smaller reductions. Currently, the 4-week average of exports is at 3.58 million barrels per day, which is still relatively high. It looks like Russia has more crude oil than it can sell right now, as oil stored in tankers has risen to 380 million barrels. We are still unsure about the full effects of US sanctions on Russian oil supplies.

Historical Patterns and Market Analysis

Looking at past trends, Russia may still find ways to sell its oil despite the sanctions. This insight comes from Commerzbank’s commodity analyst as part of a broader analysis provided by the FXStreet Insights Team. The sharp 20% weekly decline in Russian seaborne crude exports signals a short-term boost for oil prices. Already, January Brent crude futures have risen above $95 per barrel this week due to this immediate supply disruption. Traders should brace for further price increases if next week’s export numbers show continuation of this trend. However, this situation brings significant uncertainty, indicating more volatility in the weeks ahead. The CBOE Crude Oil Volatility Index (OVX) has jumped 15% since the sanctions were announced, showcasing the market’s uncertainty. This situation suggests that strategies taking advantage of large price swings may be more profitable than simply betting on one direction.

Russian Oil Storage and Market Impact

We should consider how Russia adjusted during previous sanctions in 2022. Initially, there was a drop in exports, but then they rerouted oil through a “shadow fleet” of tankers to new buyers in Asia. If this happens again, it could lessen the impact of the current supply shock. The increase in oil stored on tankers poses the greatest risk to the positive outlook. The 380 million barrels of floating storage could quickly supply the market if buyers are found or if alternative routes are established. This overhang represents nearly four days of total global oil consumption, likely preventing significant price increases. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now