A recent news article published in the Platts states that crude oil higher as traders avoid Russian Urals.
Uptrend crude oil futures
Crude oil futures continues on an uptrend in mid-morning Asian trade March 3 as the market shunned Russia’s Urals crude amid expectations of international sanctions on the country’s energy market.
At 10:58 am Singapore time (0203 GMT), the May ICE Brent futures contract was up $3.51/b (3.17%) from the previous close at $1161.44/b, while the April NYMEX light sweet crude contract was $2.80/b (2.47%) higher at $113.40/b.
International sanctions
International sanctions, which have largely focused on Russia’s financial sector have been expanded to include its energy sector. On March 2, the UK banned all Russian-owned oil tankers from docking in British ports and earlier Canada blocked oil imports of Russian oil. There is growing expectations that the US and its allies would continue to apply pressure on Russia’s energy market via a widening array of sanctions.
“The White House ratcheted up pressure on Russia with the announcement that it will apply export controls targeting Russian oil refining. This raises concerns that Russian oil supplies will continue to hit constraints,” Brian Martin of ANZ Research said in a note March 3.
“The EIA’s weekly report showed the stocks drawdown by 2,597,000 barrels last week. The data showed that US imports of Russian oil fell to zero last week.”
Fear of sanctions and geopolitical risk
The fear of sanctions and geopolitical risk have resulted in little interest for Russian Urals, with the crude trading at a steep discount. European oil refiners are shifting their crude slate away from Russian feedstock and Indian refiners are following suit, S&P Global reported earlier. Chinese refiners, on the other hand, are turning cautious citing payment and insurance risk caused by international sanctions on Russia.
“The Russian oil producer, Surgutneftegas, failed for the third time to sell Urals crude via its regular tender. Oil trader, Trafigura, also tried to sell a cargo of the country’s main export grade, but failed,” ANZ’s Martin said.
Meanwhile, the March 2 OPEC+ meeting went largely according to script with coalition members agreeing to the 400,000 b/d output increase in April, bringing little reprieve to the markets.
“Meanwhile, the OPEC+ ministerial monthly meeting offered no surprise as the members quickly agreed to boost production in April by another 400,000 barrels a day (its original plan) and described the current price movement as a result of geopolitics but made no reference to Russia-Ukraine situation,” analysts from UOB global economics and markets research shared March 3.
Oil market is very vulnerable
“The oil market is very vulnerable to a major shortage of supplies now that OPEC+ has ratified a humble supply hike. With oil prices likely to remain elevated for the foreseeable future, the only thing that will send prices down is if demand destruction becomes noticeable,” Edward Moya, Senior Market Analyst at OANDA said in a note March 2.
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Source: Platts
