January 23, 2025 [Oil Price]- Asian refiners are considering a reduction in run rates due to the hike in crude oil prices following the latest U.S. sanction push against Russia, which prompted Chinese and Indian importers to rush to buy non-Russian crude.

Citing trading sources, Bloomberg reported that the effect of the sanctions in crude oil prices in Asia has been so pronounced that in some cases it has pushed refining margins below zero. Most of the refiners affected by the ripple effect of the sanctions were in South Korea, Singapore, and Taiwan, the report noted, and normally buy Saudi crude, which is priced against benchmarks such as Oman, which is currently soaring amid the replacement rush.

In the latest sanction package, reported to be the harshest yet, the Treasury of the outgoing Biden administration imposed sanctions on Gazprom Neft and Surgutneftegaz, as well as on 183 tankers, many of them in the so-called shadow fleet Russia uses to ship its oil abroad without having to use Western vessels or insurance.

“The new Russian sanctions from the outgoing administration are a net addition to at-risk supply, adding more uncertainty to the (first quarter) outlook,” RBC Capital Markets said in a note at the time. Other forecasters warned of a further supply tightening in an already tight market, mostly because of the tanker sanctions. Following the release of the package, oil prices rose to highs not seen in months.

The sanctions will be most painful for India, analysts warned, as the country depends on imports for over 80% of its oil consumption and was the biggest beneficiary of affordable Russian crude, a lot of which has now become unavailable. According to Kpler, 75 of the sanctioned tankers were used to transport crude oil from Russia to India.

“Most of these barrels went to Indian refiners and, hence, the impact will likely be largest there,” BNP Paribas senior commodity strategist Aldo Spanier told CNBC earlier this month.