Oil’s billion-barrel buildup at sea points to sanctions stress

Core Insights - A significant buildup of oil, approximately one billion barrels, is observed on the world's oceans, with a notable portion coming from sanctioned nations, indicating disruptions in the oil trade due to sanctions [1][3][5] Supply Dynamics - Since the end of August, around 40% of the increase in oil on tankers is attributed to barrels from Russia, Iran, Venezuela, or of unclear origin, with even the lowest estimate at about 20%, which exceeds the collective global crude production share of these nations [2][12] - The increase in oil on tankers reflects both higher output and challenges in discharging, contributing to a potential oversupply in the global oil market [3][10] Impact of Sanctions - Stricter Western sanctions have resulted in Russian oil being stranded on ships, unable to discharge, with Indian refineries notably avoiding these cargoes and China showing reluctance to fill the gap [7][8] - Russian oil-related tax revenues have decreased by over 24% year-on-year, with expectations for the lowest budget contributions from oil and gas since the pandemic [8] Market Reactions - The current situation is reshaping crude flows, affecting major importers like India and China, and leading to increased shipping costs, which briefly exceeded $100,000 per day due to a stretched tanker fleet [4][6] - The surge in oil from non-sanctioned sources, particularly from Saudi Arabia and the US, is also contributing to the overall increase in oil volumes at sea [10][11]