Russian oil trade in disarray as prices blast through $100

Russian oil trade was in disarray as producers postponed sales, importers rejected Russian ships and buyers worldwide searched elsewhere for needed crude after a raft of sanctions imposed on Moscow over the war in Ukraine, Reuters reported,

Numerous nations imposed sweeping sanctions against Russian companies, banks and individuals following Russia’s invasion of Ukraine last week and global majors announced plans to leave multi-million-dollar positions in Russia.

US, European and other governments exempted energy trade from sanctions to prevent already tight markets rallying further, but that has failed.

Global benchmark Brent crude settled at nearly $105 a barrel on Tuesday, its highest since August 2014, as refiners, traders and oil majors steer clear of Russia, out of an abundance of caution that they may unwittingly run afoul of sanctions somewhere.

Russia is the second largest exporter of crude worldwide as it ships out 4 million to 5 million barrels per day (bpd) of crude, along with 2 million to 3 million bpd of refined products.

With demand already surging past pre-pandemic levels and major producers struggling to keep up, market players are increasingly fearful that prices will keep rising.

The knock-on effects of sanctions were felt all across the oil market on Tuesday. Russia’s key Urals oil grade was bid at a discount of more than $18 below physical Brent crude, the primary worldwide benchmark, a record in the post-Soviet era. Even at that price, traders have been unable to find willing buyers.

“Nobody wants to buy, ship or store Russian oil,” a trader of Russian oil said.

In response to the severity of the disruption, the International Energy Agency (IEA) said it would coordinate a release of 60 million barrels of oil reserves from big consumers, with half coming from the US.