Oil traders are staying away from Russian crude after the Western countries banned selected Russian banks from SWIFT, and Russian producers can’t sell their cargoes in tenders because no one is bidding.
After the Russian invasion of Ukraine, Russian cargoes have become toxic for most of the 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 even higher than the current $104 a barrel as of early Tuesday.
Surgutneftegaz, for example, offered on Monday two cargoes of Russia’s flagship Urals grade loading on March 10 and 11, but received no bids, traders told Reuters yesterday. This was the second time Surgutneftegaz had failed to award those cargoes after a first failed tender last week when Russian invaded Ukraine. Last week’s bids were in the region of around $15 a barrel below Dated Brent.
On Tuesday, Surgutneftegaz is offering eight cargos for loading in March, and if that tender fails again, it will be indicative of the struggles Russia has with selling its crude despite the fact that it is not directly targeted by the sanctions. Refiners are steering clear of Russian crude, charter rates have soared, especially in the Black Sea region, insurers decline to ensure tankers, and tanker owners as a whole are not willing to offer their vessels to load Russian crude.
Refiners in Europe have started to replace Russian crude. For example, Neste of Finland said on Tuesday, “Due to the current situation and the uncertainty in the market, Neste has mostly replaced Russian crude oil with other crudes, such as North Sea oil.” Neste is preparing “for various options in procurement, production and logistics.”
Sweden’s refiner Preem told Argus it had “paused all incoming orders of Russian crude oil, pending sanctions.”
Supermajor BP, which said this weekend it would exit its 20-percent stake in Russian oil giant Rosneft, has canceled all of its fuel oil loadings from a Russian Black Sea port over Putin’s invasion of Ukraine, sources with knowledge of the matter told Reuters.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.