Traders go all-in on Middle Eastern oil as sanctions rearrange oil market.
“For traders, Russian sanctions and Trump’s pressure on Canada and OPEC are a golden opportunity.”-Julianne Geiger,OilPrice.com
Oil traders are taking large positions in the Brent-Dubai spread to speculate on the price differential between Middle Eastern crude and Brent, the global oil benchmark. This speculation has reached record levels thanks to U.S. sanctions on Russian oil forcing buyers to look for supply elsewhere. This situation presents a lucrative opportunity for traders looking to capitalize on it.
Last week, open interest in the Brent-Dubai contract rose to an all-time high of 448,000 contracts, according to Bloomberg.
This spike is caused by the fact that the Dubai crude oil price recently touched the highest premium over Brent in at least 10 years. The reason is that buyers who could previously rely on Russian oil are now diligently looking for alternatives. Many are focusing on the Middle East. Rising demand has caused Middle Eastern oil prices to rise faster than crude from other regions.
This is creating quite a stir in the market.
European refiners that typically buy oil from the North Sea or Kazakhstan are seeing their usual supply take a new route – from Asia. Asian refiners, looking for a stable supply of competitively priced oil, are buying up everything, regardless of supplier.
For traders, sanctions on Russia, Trump’s grip on Canada and pressure on OPEC are a golden opportunity.
For refiners and buyers, the measures present a new challenge in a world where energy flows are anything but predictable. As long as sanctions remain in place and Russian oil remains off-limits to many, new large positions can be taken in Middle East oil. Price volatility in global crude oil markets remains this way.
The most recent Reuters investigation suggests that Saudi Arabia has increased its official selling price for Asia will start raising in March.
That is the highest price against benchmark prices since January 2024.
Crude oil
“To keep export volumes at the same level, Russia will be forced to sell crude oil below the price ceiling. At that point, Western ship operators could commit to buying Russian crude.” – Mary Melton, cargo analyst at Vortexa
The outgoing US administration has imposed the toughest sanctions yet on Russian oil.
Many ships carrying Russian oil from the Arctic Circle, Far East Pacific fields and production clusters toward Asia have now been sanctioned. Indian refineries have stopped doing business with Russian tankers and companies sanctioned by America. So says a source in the Indian government.
A week after the aggressive sanctions, Asian buyers of Russian oil are looking for alternative supplies.
This has increased the price of oil. Analysts suggest that about 1.5 million barrels per day (bpd) of Moscow’s export volume could be severely constrained. Especially in the short term. More than a third of these cargoes will require specialized, purpose-built tankers that will be difficult to replace. Read more about this in Bloomberg’s analysis.
The crude oils most affected by the sanctions will be Sokol, Sakhalin and ESPO, Bloomberg expects.
The least affected shipments are probably the Urals from the Baltic and Black Seas. The lion’s share of these go to India.
The sanctions are already shaking up the market. India and China are rushing to secure alternative supplies as they study the broader implications of U.S. sanctions on Russian oil supplies six months from now.
Because of the sanctions, several million barrels of crude oil bound for India found themselves in an awkwardsituation.
There is a so-called transition period through Feb. 27 for parties to settle trade with the now-sanctioned entities and vessels. Indian state refiners are currently trying to settle payments in half the time it normally takes. The deals must be completed before the six-week wind-down period ends and the sanctions take effect. India does not expect any significant disruptions during the transition period through March.
Indian officials and refiners are holding emergency meetings to discuss the implications of the sanctions on their largest crude oil supplier.
Chinese independent refiners are also affected by the outage and are looking for a workaround to the sanctions, according to Bloomberg. Fleet capacity serving Russian exports is expected to decrease significantly, according to Vortexa. So far, sanctions on individual ships have proven very effective in limiting use for Russian trade. According to Vortexa, the most likely future scenario for Russian oil exports is that they will face serious logistical problems due to the lack of available transportation. Greater loyalty to the Russian price limit, however, will depend on China’s stance on allowing sanctioned vessels into its ports, Vortexa acknowledges.
The daily rate for very-large crude carriers (VLCCs) on the Middle East to China route has more than doubled on the Baltic Exchange.
The cause is the sanctioning of nearly 160 tankers. Rates for the route from the US Gulf toward China increased 102%, while the West Africa to China route saw a 90% increase in rates.
Price Crude oil – Brent April 2025 ($/barrel) – day cloud candle, log scale
ElecÂtricity
“Apart from nuclear fusion, considered the holy grail of infinite clean energy, such a research site could also simplify the design of nuclear weapons.” – William Alberque, nuclear policy analyst at Henry L. Stimson Center
China is reportedly building a large fusion research site in the southwest.
Analysts and researchers analyzing satellite images of this indicate that this site could contribute to nuclear fusion efforts as well as nuclear weapons design. The city of Mianyang is expected to be the new site of the fusion research facility. This site is estimated to be 50% larger than the U.S. National Ignition Facility (NIF) in Northern California with a similar design. This is according to Decker Eveleth, a researcher at CNA Corp, an American-based independent research organization. Satellite images of the site show four bays with lasers and a central bay for experiments.
The Comprehensive Nuclear-Test-Ban Treaty (CTBT), signed by both China and America, prohibits all nuclear explosions, regardless of purpose or location.
Laser fusion, however, is allowed. Nuclear fusion R&D has gained momentum in recent years after several breakthroughs and milestones achieved.
A global race has begun to produce CO2-free electricity from a nuclear reaction, without the risk of disaster or radiation.
“I told the European Union that they must compensate for their huge deficit with the United States by buying our oil and gas on a large scale. Otherwise, import tariffs will follow.” – Trump
Europe must avoid over-dependence on U.S. energy supplies.
German outgoing Economy Minister Robert Habeck warns of this. The warning comes at a time when President Trump is demanding that the European Union buy enough oil and gas from America. This could reduce the US trade deficit with the EU. Otherwise, import tariffs will be imposed, according to Trump. The trade gap in 2023 was $57 billion, in favor of the EU. If the EU on balance buys more from America, this deficit can be reduced, as can the trade debt to Europe.
Habeck says over-reliance on America carries the same kind of risks as with Russia.
He urges Europe to accommodate Trump’s administration with an outstretched hand. He adds, however, that the EU should define its own interests rather than submit to America’s direction.
Trump has long been critical of America’s trade deficits with other countries.
He favors using import tariffs as bargaining tools to achieve various policy goals. One such goal is for Europe to buy more energy from America. This would increase America’s prosperity. A second objective is to support European countries in strengthening their security relationship with a NATO member by further reducing dependence on Russian energy imports.
Although the EU has greatly reduced its dependence on Russian energy from the start of the war in Ukraine, significant amounts of Russian natural gas are still imported.
Europe imported a record nearly 18 million tons of LNG from Russia in 2024. This broke the previous record from 2022, despite the EU’s pledge to end all energy trade with Russia by 2027.
European officials have acknowledged that more needs to be done to stop dependence on Russian energy.
Despite the lack of progress in some areas, the EU remains determined to cut all energy ties with Russia and is developing a plan to achieve this goal. This is stated by European Commission spokesperson Anna-Kaisa Itkonen. Senior EU officials have signaled their intention to increase their purchases of U.S. energy. Ursula von der Leyen, president of the European Commission, said in November that LNG imports from America could replace remaining imports of Russian LNG.
But as the Ukrainian front lines are collapsing and a deal to end the war seems inevitable, resumption of purchases of Russian pipeline gas could be part of any potential end to the war.
This writes the Financial Times. This newspaper reports that supporters of such a “controversial” plan, including Hungarian and German leaders, argue that the stability of Europe’s energy market could be an underlying incentive for maintaining peace; Or as one EU official put it “In the end, everyone wants lower energy costs.
The mere suggestion of such a large-scale return of Russian pipeline gas to the EU could face immense political backlash from those who benefit most from the current war-time blockade of gas shipments and sanctions.
The revival of the debate over purchases of gas from Russia has also unsettled some U.S. LNG exporters. They would like to sign long-term supply deals with European companies. Exporters fear that any restart of Ukrainian transit will make their products uncompetitive. Slovakia and Hungary are among the countries that continue to rely heavily on the continuation of Russian gas. These countries have resisted EU attempts to impose supplier diversification.
The biggest beneficiary of non-Russian LNG imports that have so far closed the supply gap is America.
This country has seen its LNG exports to Europe increase sharply since the Ukraine war. Ever since the Nordstream pipeline was blown up, (expensive) U.S. LNG has been one of the few alternatives for Europe. In other words, Europe has gone from relying entirely on cheap Russian gas to relying entirely on costly, U.S. LNG.
The Netherlands is 36% below the European mandatory 39% gas supply.
The average stock at the European level stands at around 50%. Interventions from the EU will not follow yet because 34% is a hard lower limit. In addition to the cold winter weather, gas prices rose last week due to unplanned outages in Norway and Greece. The turmoil in the gas market is visible in front prices for the coming periods.
Price TTF gas supply year 2026 (eur/MWh) – week cloud candle, log scale
Coal
“In the US, we know that ultra-cheap shale gas has eroded the profitability of coal-fired power plants. In America, gas is coal’s biggest enemy.” – Javier Blas, Bloomberg analyst
President Donald Trump has declared a national energy emergency declared to expand fossil electricity production.
There is increasing demand on the power grid through the “Powering Up America” theme, including AI data centers, electrification of the economy and more inland-oriented trends. Trump’s decision is a major policy shift from the Biden-Haris green policy. Those policies kept the U.S. economy in a “stranglehold” that allowed American companies to be less competitive globally. Meanwhile, China increased its cheap energy supply by expanding coal-fired power generation. ” They can supply their energy with whatever they want, and they have coal as a backup – good, clean coal,” Trump said of China.
Trump believes that coal can be used as a critical backup energy source when critical infrastructure such as natural gas and oil pipelines are “blown up.”
America is the largest producer of oil and natural gas. The country has the largest coal reserves worldwide. As a coal producer, America ranks fourth behind China, India and Indonesia. With Trump pausing the war on fossil fuels, the urgent need to increase electricity production via natural gas and coal is likely to become a reality. The decision is aimed at securing a more stable transition to a clean energy future, including nuclear. At the same time, hopefully energy bills can be lowered for U.S. citizens.
According to plan, a quarter of US coal plants will be closed by 2040.
Ensuring stable and cheap fossil fuel production in the transition to nuclear could be important in maintaining America’s competitiveness with China in global markets.
“Much more needs to be done, especially in emerging areas such as industrial decarbonization, hydrogen and carbon capture, to meet global net zero targets.” – Albert Cheung, deputy CEO of BNEF
Global green investments rose to a record $2,100 billion in 2024.
That was 11% more than 2023. Growth did slow down from the 2021-2023 period. Reaching net-zero by 2050 would require energy transition investments of $5,600 billion each year between 2025 and 2030. That would be in line with the Paris Agreement, BloombergNEF writes in its report “Energy Transition Investment Trends 2025. So the current level of investment is only 37% of what would be needed.
While China leads in green spending, it has stagnated in America.
Investment in the EU and Britain actually declined in this area. In the years 2021 to 2023, global clean energy investments grew between 24% and 29% each year, according to BNEF. Electric transport is still among the top segment for low-carbon energy investments with investments of $757 billion in 2024.
China remains the single largest market with $818 billion in investment.
That is 20% more than in 2023 with increased investment in all sectors. China’s total investment last year was even greater than the combined investment of America, the EU AND Britain. America stagnated at $338 billion. In the EU and Britain, investment in 2024 was $381 billion and $65.3 billion, respectively.
“Much more is needed, especially in emerging areas, such as industrial de-carbonization, hydrogen and carbon capture, to achieve net-zero targets,” said Albert Cheung, deputy CEO of BNEF.
“We’re not going to do the wind thing.” – Donald Trump
Shares of European wind and renewable energy companies were under pressure after Trump signed an executive order temporarily halting the sale of offshore wind leases in U.S. waters.
Industry-wide gloom was magnified when Danish offshore wind developer Ă˜rsted announced write-downs. These were larger than expected by Wall Street analysts. Ă˜rsted shares fell 18% in Copenhagen. This was the biggest drop since November 2023 when the company announced a writedown of 12.1 billion Danish krone ($1.68 billion) on its troubled U.S. operation.
Ă˜rsted points to interest rate rise, seabed leases and implementation of Sunrise Windwhich add up to the $1.68 billion impairment in the 4th quarter of 2024. The Sunrise Wind project is located on the coast of Montauk, New York. Thunderclouds continue to gather for the Danish company. Trump’s executive order postpones new offshore wind lease sales in U.S. waters. The issuance of approvals, permits and loans for both onshore and offshore wind projects is halted.
Goldman called Ă˜rsted’s announcement a surprise. The investment bank warned that there is potentially more bad news ahead. Goldman Sachs analysts maintain a “neutral” rating for Ă˜rsted with a 12-month price target of 445 Danish krone.
Trump’s announcement depressed share prices of renewable stocks. The iShares Global Clean Energy ETF (ICLN) has been declining for 3.5 months on anticipation that Trump will scale back green energy spending. The iShares index is currently trading around 2020 lows.
On Wall Street, analysts voiced concerns after Ă˜rsted’s announcement.
Trump’s executive order adds to that. It signals increased risks in U.S. offshore wind and renewable energy industries.
In short, lots of bad news for the green energy bubble in the era of Trump 2.0.
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