Russia’s oil trade in turmoil over sanctions as prices break through $ 100 / barrel

London — Russia’s oil trade on Tuesday has attracted buyers around the world after producers postponed sales, importers rejected Russian ships, and a series of sanctions imposed on Moscow during the war in Ukraine. I was confused because I searched for the necessary crude oil.

Following Russia’s invasion of Ukraine last week, many countries have imposed drastic sanctions on Russian companies, banks and individuals, and global majors have announced plans to leave Russia with millions of dollars. did.

The US, Europe and other governments have exempted energy trade from sanctions to prevent further recovery of already tight markets, but that has failed.

Brent crude, the world benchmark, settled on Tuesday at around $ 105 a barrel. This is the highest since August 2014 as refiners, traders and oil majors have avoided Russia with sufficient caution that they could unknowingly violate sanctions somewhere.

Russia is the world’s second-largest crude oil exporter after Saudi Arabia, shipping 4 to 5 million barrels (bpd) of crude oil and 2 to 3 million barrels per day of refined products per day. Market players are increasingly afraid that prices will continue to rise, as demand has already surged above pre-pandemic levels and major producers are struggling to catch up.

The knock-on effect of sanctions was felt throughout the oil market on Tuesday. Russia’s major Urals oil grade was bid at a price more than $ 18 cheaper than physical Brent crude, the world’s leading benchmark for post-Soviet era records. Even at that price, traders couldn’t find an ambitious buyer.

“No one wants to buy, ship or store Russian oil,” said a Russian oil trader.

In response to the seriousness of the turmoil, the International Energy Agency (IEA) has adjusted the release of 60 million barrels of oil reserves from large consumers, half of which is from the United States.

The market has risen further and saw the release (equivalent to less than a day of global oil consumption) as an emphasis on global supply shortages.

Futures market traders have aggressively pushed the price of current Brent contracts to more than $ 15 higher than contracts to deliver oil six months from now. This is also a record, indicating growing concern about tight supply.

Avoid the Russian barrel

Even non-Russian oil is in turmoil.

Five traders who spoke with Reuters said they are avoiding oil supplied by the CPC pipeline, which supplies more than 1 million barrels / day from Kazakhstan, or more than 1% of the world’s supply. According to traders, the Black Sea.

“This is an important source of oil to the world today, one million per day,” Chevron CEO Mike Worth said in a call with reporters on Tuesday. Beyond the barrel. “

Chevron Corp holds a 15% stake in CPC and a 50% stake in Tengizchevroil (TCO), which develops oil fields in western Kazakhstan.

Rival energy companies BP, Equinor and Shell have abandoned their multi-billion dollar position in Russia, and BP has already canceled all fuel oil loads from Russia’s Black Sea Taman port. A detailed source said.

Exxon Mobil Corp has not stated that it will abandon its business in Russia, but said it has separated US employees from Russia.

Buyers around the world were trying to secure supplies from elsewhere. The state-owned Indian refiner Bharat Petroleum Corp, which buys about 2 million barrels of Russian Urals each month, is seeking more oil from producers in the Middle East in April.

Canada announced on Monday that it would ban oil imports from Russia.

US traders have begun to avoid the Russian barrel, but Asian buyers have been waiting for clarification from banks as to whether they can trade with Russian sellers.

The Malaysian government has stated that Russian-registered oil tankers subject to US sanctions are not allowed to call at Kuala Ringi Port.

European Union countries are considering banning Russian ships entering ports within the block. The UK said on Monday that it would refuse all ships owned, operated, managed, chartered, registered or flagged by Russia to enter the UK’s port.

Russian solution

Meanwhile, Russia is expected to increase its supply to China. Transneft, an oil pipeline monopoly that handles more than 80% of Russia’s total oil production, will increase supply to China via the ESPO pipeline this month from 2.22 million tons in February to 2.48 million tons, according to TASS news agency. It’s a plan.

Some Russian oil companies are familiar with the issue, saying they have stopped banking with licensed lenders such as VTB and Sberbank and switched to those that are not facing restrictions such as Rosbank, UniCredit and Reuters. A person told Reuters.

Ron Bousso, Julia Payne, Dmitry Zhdannikov