Business

Oil prices remain high when Russia’s crude oil shortages hit the market

The de facto strike of crude Russian buyers, which began months ago, pushed oil prices to their highest level in years. Now the real effects are starting to create a second wave in the oil markets, with Russian exports suspended and more price threats threatening.

Large energy companies and commodity trading houses refused to buy crude oil from Russia in the days following the Ukrainian invasion. Banks also stopped financing these trades, the shippers refused to load the loads, and the insurance stopped covering them for fear of non-compliance with penalties, or outraged members of the company.

Oil is usually delivered within about three weeks of reaching an agreement, which means that the fall in the initial warfare agreements led to real disruptions in supply that began last week. Doubt is being felt in Europe, where the price of diesel driving cars, trucks and tractors has risen.

Russia’s oil exports fell to a nearly eight-month low last week, according to Kpler data. In the first two weeks after the invasion, these volumes remained strong as trade was delivered on 24 February before Russian troops crossed the border.

UBS estimates that about 2 million barrels a day, or a fourth of Russian production, have been suspended. The International Energy Agency predicts that the level could reach 3 million by next month, warning that it could break out in the worst energy supply crisis in decades.

“Commodities are priced now, not in the future,” said UBS commodity analyst Giovanni Staunovo. “We are seeing some disruptions in the volumes of Russian and crude oil and Russian products. If we get more disruptions in the future, the price will react even more.”

Global benchmark Brent gross rose 9% last week to a low of $ 117 a barrel after falling for two consecutive weeks. Oil prices have long responded to the push and pull between speculators in futures markets and traders who buy and sell real oil barrels, both trying to assess how much supply there is at the moment and how much there will be in the future. It is more difficult for oil traders now to make such judgments, as regular buyers of Russian oil are sidelined.

Russia is the third largest oil producer in the world, behind the United States and Saudi Arabia. Before the war, it supplied about 7.5% of the world’s crude oil and refined products. The United States, Canada, the United Kingdom, and Australia have banned oil imports from Russia, and the European Union continues to buy from its largest customers, but has begun discussions to reduce purchases in the future.

There has been an exodus of oil companies from the country, including BP PLC and Shell PLC, as well as oil service companies, including Halliburton Co..

Baker Hughes Co. and Schlumberger Ltd.

Shell said in early March that it would close its service stations in Russia.


Photo:

ANTON VAGANOV / REUTERS

The world consumes about 100 million barrels of oil a day. The impact of global supply is affecting the already tight market due to the reduction in production by the Organization of the Petroleum Exporting Countries and its allies. Oil companies have been slow to spend on new oil fields, pushing shareholders to switch to cleaner energy sources and fatter payments.

A common type of Russian oil, known in the industry as the Ural, is getting an increasingly discounted price, and as a result, Russian oil buyers continue to falter. Russia’s main oil trading basin Lukoil last week tried to sell crude Ural crude for $ 31 below Brent, according to a trader. It was more than the difference two weeks ago, when the range was about $ 28. Before the war, the Urals traded close to landmarks.

A Lukoil spokesman did not immediately respond to a request for comment.

Traders said some deals are being removed from a broader perspective. Known in the industry as an out-of-market deal, purchases are made by large trading houses that are able to finance the purchases themselves instead of using bank credit, they said. These Ural barrels have been sold at a lower discount than on online platforms where other participants can view trade records.

These agreements will be made public about three weeks after the oil is loaded into cargo and agreed to be traded. Shipping data typically determines the content, buyer, and seller.

SHARE YOUR THOUGHTS

What is the view of the energy market in view of the shortage of crude Russians? Join the conversation below.

Russia has rapidly gone from being an open and central role in the world’s oil supply to being a raw black sheep. Traders said that Russian oil is not at work or discussed among industry friends. Some traders are banned from trading Russian grades throughout the company, and compliance departments are reluctant to hand them over to individual traders.

One trader compared the purchase of Russian oil to a case in which a Japanese whale hunting fleet was asked to sell oil. “That’s the kind of situation you don’t want to talk about,” he said.

Shell bought a cargo of oil from Russia in early March, sparking a rally from the Ukrainian government, rival traders and media organizations. The company apologized and said the proceeds would go to charity efforts to alleviate the humanitarian crisis in Ukraine.

The effects of severe economic sanctions on Russia are already being felt around the world. Greg Ip of the WSJ joins others in explaining the importance of what has happened so far and how conflict can change the global economy. Photo illustration: Alexander Hotz

Write to Anna Hirtensteini at anna.hirtenstein@wsj.com

Copyright © 2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Oil prices remain high when Russia’s crude oil shortages hit the market

Source link Oil prices remain high when Russia’s crude oil shortages hit the market

Back to top button