The US government jolted energy markets when it announced sanctions on Russia’s two biggest crude oil producers on October 22^nd. All eyes are now on how global oil supply and prices will react after the measures took effect on November 21^st. Russia’s exports, about 7.4 million b/d (IEA), account for about 7% of global crude oil and refined fuel consumption. The latest penalties on Rosneft and Lukoil, combined with sanctions imposed earlier this year, mean that firms shipping the majority of Moscow’s oil to overseas markets are now blacklisted.  India and China are currently the two largest buyers of Russian crude. As of October 24^th, they were taking nearly 3.6 million barrels (Bloomberg) of Russian crude on a daily basis.

The current peace proposal would require that Kyiv cede territory to Russia, block its ambitions to join the North Atlantic Treaty Organization (NATO), and cap the size of its military. Another significant provision precluded the deployment of a European-led “reassurance force” in Ukraine to deter future Russian attacks. In reaction, several European allies have drafted a counter-proposal, with different interpretations for NATO, Ukraine’s future territorial status, and security guarantees.  Therefore, it seems unlikely that a comprehensive “Peace Deal” will be reached that satisfies Ukraine, Russia, and the EU all at once whereas a partial ceasefire could be more likely than a long-term solution.  In the event sanctions were lifted on Russian oils and the Russian tanker fleet (Sovcomflot), McQuilling projects demand increases for up to 56 Aframax equivalent assuming 700,000 b/d of additional Russian crude exports to China and India, while a net of 23 Aframaxes (average age at 18yrs) may return to the conventional fleet. This would create a net positive support on mid-sized tanker demand by 40 Aframax equivalent, and higher TCEs by US $33,160/day (1 Aframax demand = $829/day).