KUALA LUMPUR, 23 October 2025 — Brent crude prices surged to US$66 per barrel this week following sweeping new sanctions imposed by the United States on Rosneft and Lukoil, Russia’s two largest oil companies. The move has rattled global oil markets, tightening near-term supply and widening Brent’s backwardation from US$0.12 to US$1.36 per barrel.
The Ledger Asia had previously reported on the sanctions announced by President Vladimir Putin in response to Western economic restrictions. This latest move by Washington marks a significant escalation in the ongoing energy and geopolitical standoff.
Sanctions Send Shockwaves Across Oil Markets
According to Rystad Energy, the sanctions have disrupted between 500,000 and 600,000 barrels per day (bpd) of Russian oil supply as traders and refiners scramble for alternatives.
“The latest sanctions on Russia’s two largest oil companies, Rosneft and Lukoil, resulted in Brent surging 6% in one day,” said Janiv Shah, Vice President of Commodities Markets, Oil at Rystad Energy. “We estimate that up to 600,000 bpd of Russian oil production is at risk of being curtailed.”
With Russian barrels increasingly unavailable, India and Turkey are expected to reduce imports from current levels of around two million bpd. Early signs suggest Chinese state-owned refiners have begun cancelling Russian purchases, prompting a shift toward Middle Eastern medium sour grades.
The global oil balance remains fragile, with potential stock builds later this year. Yet, the immediate supply loss has introduced short-term tightness, intensifying volatility.
Increased drone strikes on Russian refineries could further dampen domestic demand and accelerate production shut-ins. The Organization of the Petroleum Exporting Countries (OPEC) has already indicated readiness to offset some of the lost supply at its upcoming meeting.
“The market will take note of this move and recalibrate accordingly,” Shah added. “This could significantly disrupt flows, making Urals grades politically uneconomic for many buyers.”
Southeast Asia Feels the Ripple
In Southeast Asia, refiners are closely monitoring the sanctions’ fallout. The region, particularly Singapore and Malaysia, relies heavily on crude imports to feed local refining and petrochemical operations.
Singapore, one of Asia’s major oil trading hubs, could see tighter margins as Russian crude availability shrinks. In December last year, Bloomberg reported that ExxonMobil was considering selling its network of 59 Esso-branded service stations in Singapore, a move seen as part of its broader strategy to redeploy capital toward higher-growth assets, a context that now appears increasingly relevant.
Meanwhile, Malaysian refiners sourcing from the Middle East may benefit in the near term from improved crack spreads, as refiners in China and India turn to the same grades.
“Middle Eastern spot premiums have strengthened rapidly on implied tightness and could rise further if sanctions persist,” Rystad noted.
Russia’s Energy Exports Under Pressure
Collectively, Rosneft and Lukoil export around three million bpd of crude and one million bpd of refined products. Rosneft ships approximately 800,000 bpd to China via the ESPO pipeline and Far Eastern ports, while Lukoil exports primarily from western and Arctic terminals to Turkey, India, and China.
The US Treasury Department said the sanctions are designed to “degrade Russia’s ability to fund its war effort” and weaken the Kremlin’s access to global markets. Companies now on the Specially Designated Nationals (SDN) list account for roughly seven million bpd of Russia’s crude and condensate output, nearly two-thirds of total production, and about four million bpd of exports.
While the sanctions are unlikely to entirely cripple Russian energy exports, they are expected to drive greater volatility in oil markets and reshape regional trade flows across Asia, with Singapore’s energy sector and Malaysian refiners among those feeling the early tremors of a shifting global crude landscape.
