The United States is considering further lifting sanctions on Russian oil! With threats of supply disruption in the Middle East, Russian oil has become a hot commodity?

Just over a week ago, Russia's energy industry was in its worst state in years, with low oil prices and sanctions depleting the country's economic resources. Millions of barrels of Russian oil floated at sea, with much of it having no destination. But now, the fires of war in the Gulf have completely changed the situation. Russian oil, which was hard to find buyers for last week, is now in high demand. The United States has relaxed some sanctions, allowing key buyers of Russian crude oil to make purchases; and with soaring oil and natural gas prices, Russian producers are expected to see higher profits. Against the backdrop of the largest increase in U.S. WTI crude oil since at least 1985, the change in attitude towards Russian oil sanctions in the past week is undeniable: First, the U.S. Treasury Department's Office of Foreign Assets Control announced on Thursday (March 5) that it would issue a general license related to Russia, allowing the sale of some Russian oil to India, with the license valid until April 4, 2026. Subsequently, U.S. Treasury Secretary Scott Bennett said in an interview on Friday (March 6) that the U.S. government is considering lifting sanctions on more Russian oil due to the global surge in oil prices. Bennett explained, "The Treasury Department has agreed to let India start buying Russian oil that has already been shipped... to alleviate the temporary shortage of global oil supply, we have allowed them to accept Russian oil. We may lift sanctions on other Russian oil." "There are currently hundreds of millions of barrels of sanctioned crude oil at sea. In fact, the Treasury Department can create supply by lifting sanctions on these crude oils," Bennett added. In response, Kremlin economic adviser Dmitryev also said that he is discussing the issue with the United States and posted on social media, "Western sanctions have been proven to be harmful to the global economy." Importance of Russian oil highlighted under Middle East conflict The latest data shows that the discounts traders previously requested when purchasing Russian oil in India have now started to reverse, with some sellers trying to sell Russian oil at prices higher than the global benchmark Brent crude oil. Naveen Das, senior oil analyst at vessel tracking data provider Kpler, said, "The longer this conflict lasts, the more the world will depend on Russian crude oil and refined oil products." This geopolitical situation has enhanced Russian President Putin's confidence in energy issues. According to media reports, Russian President Putin said on the 4th that considering the EU's intention to completely stop buying Russian natural gas, Russia may consider stopping gas supply to Europe ahead of schedule. Putin pointed out that considering the EU's plans to restrict imports of Russian natural gas to complete prohibition, Russia may consider stopping gas supply to Europe now, which may be more beneficial to Russia. He emphasized that this is not a final decision, and he will instruct the government to study the issue. On Friday, Kremlin spokesman Dmitry Peskov also said that the war in Iran has stimulated demand for Russian energy products. Russia is one of the world's largest oil exporters. Before the Russia-Ukraine conflict in 2022, Russia was the world's third-largest oil producer after the United States and Saudi Arabia, and one of the world's top three oil exporters, maintaining this position last year despite sanctions. However, in recent years, Russian oil has been sold at record discounts, squeezing the country's oil industry. In January, Russia's oil and gas income hit its lowest level since July 2020. Higher oil prices will help ease Russia's financial pressure and may lift its economy out of a period of stagnation. The conflicts in the Gulf have resulted in soaring oil and natural gas prices, with global benchmark Brent crude oil prices rising by nearly 30% since the U.S. launched attacks on Iran earlier this month. These higher prices typically benefit producers around the world. The turmoil in the Gulf region also means that Russia's main competitors there are unable to take advantage of the situation. Asian buyers show strong interest, Europe falls into an awkward position again Currently, major energy buyers in Asia such as India, Japan, and South Korea are competing to secure supply from elsewhere, giving Russia new bargaining chips. At the same time, Europe now needs to compete with Asia for liquefied natural gas cargoes, with natural gas prices rising. According to traders, some Indian refineries have received offers for Russian crude oil that are $1 to $5 higher than the global benchmark Brent crude oil, based on arrivals in Indian ports this month and next month. In contrast, discounts in February had been more than $10 below Brent crude oil. Tankers and liquefied natural gas carriers are almost unable to enter and leave the Gulf, through which around 20% of global oil supply passes each day. QatarEnergy, which produces about 20% of the world's liquefied natural gas and related products, halted its liquefied natural gas production after its facilities were attacked by Iranian drones this week and declared force majeure two days later. According to Kpler's data, there are currently about 130 million barrels of Russian crude oil at sea, with some already sold but a significant portion still awaiting buyers. The developments in the Gulf region have once again put Europe in an "awkward" position, reigniting concerns in Europe about its energy sources. Europe has heavily relied on Russia in the past and has been working to diversify its imports in recent years, leaning more on the United States and the Middle East. Although the liquefied natural gas Europe gets from Qatar is less than 10% of its total imports, the production disruption there has sparked a bidding war between European and Asian buyers for the remaining natural gas, who are most vulnerable to disruptions in Middle Eastern supplies and are willing to pay higher prices. According to ship tracking data companies and analysts, several laden liquefied natural gas carriers have redirected from European destinations to Asia in the past few days due to higher prices in Asia. The combination of these factors has made Putin's threat to cut off the remaining gas supply to Europe on Wednesday more "powerful" than ever before. Industry insiders say that if the Gulf remains closed for the long term, some Europeans are already concerned that this will force the region to reconsider its tough stance against restoring energy ties with Russia. Martin Senior, director of European liquefied natural gas pricing at Argus Media, said that going back on promises to gradually phase out Russian natural gas and liquefied natural gas would be a "political disaster."