The actual boycott that oil buyers have boycotted Russian crude oil since a month ago has brought oil prices to the highest level in years. Now the real effects are starting to create a second wave of impact on the oil markets, interfering with Russian exports and threatening to raise prices even further.
Large energy companies and commodity trading companies refrained from buying Russian oil in the days following the invasion of Ukraine. Banks have stopped financing this trade, shipping companies have refused to load the cargo and insurance companies have stopped insuring them, for fear of improving sanctions or upsetting their shareholders.
The oil is usually shipped about three weeks after a deal is closed, which means the decline in closing deals in the first days of the fighting has led to supply disruptions that began last week. In Europe it is felt strongly, where diesel prices, fuel for trucks, tractors and certain cars, have soared.
The lowest level of exports in eight months
Exports of Russian oil by sea fell to its lowest level in more than eight months last week, according to Kpler. For the first two weeks after the invasion, volumes remained large because cargo was shipped in connection with deals made before Russian troops crossed the border into Ukraine on February 24.
UBS estimates that about 2 million barrels a day, or about a quarter of Russian output, have been disrupted. The International Energy Agency predicts that this level could reach 3 million barrels by next month and warns of the severe energy supply crisis for decades.
“Commodities tend to price the present, not the future,” said Giovanni Staunovo, a commodities analyst at UBS. “We are starting to see some disruptions in the volume of crude oil and products from Russia. If there are more disruptions later, the price will respond to it more.”
Brent International Benchmark rose 9 percent last week, settling around $ 117 a barrel after two weeks of declines. Oil prices have long responded to the push and pull between futures speculators and traders buying and trading actual oil barrels, and both sides are trying to assess how much demand there is at the moment and how much will be in the future. It is more difficult for oil traders to make these assessments at the moment, when buyers accustomed to purchasing Russian oil are on the margins.
Russia is the third largest oil producer in the world
Russia is the third largest oil producer in the world, after the US and Saudi Arabia. Before the war, it supplied about 7.5% of the world’s crude oil and refined products. The US, Canada, UK and Australia banned oil production from Russia, while the EU, the big customer Most, continues to purchase oil but has begun discussions about reducing the amount of oil purchased in the future.
There was an exit of large oil companies from Russia, including British Petroleum (BP) and of, as well as of oil service companies like Liberton, Baker Hughes and Schlumberger.
The world consumes about 100 million barrels of oil a day. The blow to global supply is affecting a market that is already tight due to declining production of OPEC and its allies. Oil companies have been slow to invest in new oil fields because investors are pushing to move to cleaner energy sources and larger returns.
One of the known types of Russian oil, known as Ural in the industry, is priced at an increasing discount, indicating the reluctance of oil buyers from Russia. The trading arm of the Russian oil company Lukoil tried to sell crude oil from the Ural Mountains for $ 31 compared to the Brent last week, a trader said. It was a bigger discount than two weeks ago, when the gap was about $ 28. Before the war, the oil of the Ural Mountains was traded at a price close to the benchmark price.
A spokesman for Lukoil did not immediately respond to a request for comment.
There are deals that are still being signed away from the public eye, traders say. In industry these transactions are called off-market transactions. The buyers are large trading houses that can finance the purchases themselves by using bank credit, they said. These Ural oil barrels were sold at less large discounts than online platforms where other participants see a listing of transactions.
These deals will be disclosed to the public when the oil is loaded for charging about three weeks after the deals are signed. Shipping data usually includes the contents and identities of buyers and sellers.
Russia has rapidly moved from a position where it has played a key role in the global oil supply to the region’s black sheep. Traders say they no longer talk about Russian oil at work or among industry members. There are traders who are under the company’s ban on trading in Russian oil, where the companies’ compliance departments do not leave the decision in the hands of individual traders.
One trader likened buying Russian oil to a case in which he was asked to sell the oil to a Japanese fleet of whalers. “It’s a kind of situation where you do not even want to talk about it,” he said.
A company purchased a shipment of Russian oil in early March, prompting the Ukrainian government, competing traders and telecommunications organizations to reprimand it. The company apologized, saying it would donate the proceeds to aid efforts designed to alleviate the humanitarian crisis in Ukraine.