Oil prices shot up to over $112 per barrel early on Wednesday, rallying by 10 percent so far this week, as most of the Russian seaborne crude oil exports have become untouchable for buyers after sanctions against Russia for invading Ukraine.
Despite the fact that the sanctions against Russia carve out energy and energy payments out of the SWIFT restrictions and bans, Russian producers can't sell their cargoes in tenders because no one is bidding, while many refiners—especially in Europe—are shunning Russian crude and scrambling for alternatives.
"Because of the banking sanctions we've estimated about 70% of Russian crude oil exports can't be touched. That's about 3.8 million bpd," Amrita Sen,
Director of Research at Energy Aspects, told CNBC's Pippa Stevens on Wednesday.
"Most European majors are not touching Russian oil, and only a few European refiners and trading firms are still in the market, but spiking freight rates and war insurance premiums are significantly complicating transactions," Energy Aspects told the Financial Times today.
After the Russian invasion of Ukraine, Russian cargoes have become toxic for most traders, insurers, and tanker owners, although the sanctions do not target energy exports. Some refiners and traders are uncertain how the bank credits would work; others are staying away to avoid reputational damage.
The global oil market is starting to see disruption in Russian supply, which could send oil prices as high as $150 per barrel, according to Energy Aspects' Sen.
While many major companies and traders are steering clear of Russian cargoes, Shell is reportedly going forward with buying Russian oil and gas, a source told Bloomberg on Wednesday, adding that Shell would comply with any changes in regulations.
By Tsvetana Paraskova for Oilprice.com
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