(Oil Price) – The sanctions squeeze on oil supply from Russia and Iran are tightening the oil market and supporting crude prices as buyers look for additional legit barrels while sanctioned supply is piling in floating storage, according to the world’s biggest independent oil trader, Vitol.
“The traditional buyers of those two supply sources are reaching for more Western or Saudi supply sources, which is then in turn tightening the real market,” Vitol’s CEO Russell Hardy said at the International Energy Week conference in London on Thursday, as quoted by Bloomberg.
Fears of massive oversupply this year haven’t filtered through oil prices. Instead, the U.S. sanctions on Russia’s top producers and the pressure on India to slash Russian purchases as part of the recently reached U.S.-India trade deal, have acted to support oil prices, alongside geopolitical flare-ups in Iran and Venezuela.
India has reportedly asked its refiners to consider buying more crude cargoes from the U.S. and Venezuela on the spot market as Indian oil purchases are under scrutiny following the trade deal with the United States. Indian refiners are steering clear of Russian crude in the wake of the trade deal with the United States, which the White House said includes India’s commitment “to stop directly or indirectly importing Russian Federation oil.”
Meanwhile, tankers carrying a total of up to 12 million barrels of crude oil are either en route or floating close to China in East Asian waters, waiting for buyers in the world’s top crude importer, as India is pulling back.
The outlook of global supply-demand balances needs to consider the shunning of the sanctioned supply, “because that’s roughly a million barrels a day that’s not finding a refinery — it’s just sitting on the high seas,” Vitol’s Hardy said.
“Cracks are beginning to appear and geopolitics at the moment is definitely putting more pressure on the supply side,” the executive said in remarks carried by Reuters.
Early on Thursday, Brent Crude prices were trading at $69 per barrel, after rallying in the past weeks. The U.S. benchmark, WTI Crude, was just below $65 per barrel, at $64.35.
By Charles Kennedy for Oilprice.com
