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Oil markets hit multiple milestones after Russia sanctions -Breaking

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© Reuters. The oil barrels were pictured on the Vermilion Energy site in Parentis-en-Born France (October 13, 2017). REUTERS/Regis Duvignau/Files

Florence Tan and Gavin Maguire

SINGAPORE (Reuters – As a result of the severe sanctions imposed on Russia, oil benchmarks continue to hit multiple milestones and prices in several markets.

Following Russia’s invasion, several countries including the United States have sanctioned numerous Russian entities. Washington however has exempted oil products from Russian measures.

The price of a barrel rose to $112 per barrel Wednesday. This is the highest record since 2014.

Crude oil market milestone mayhem https://fingfx.thomsonreuters.com/gfx/ce/zdpxokxjbvx/CrudeMktMilestones.png

Brent’s price spread in the past 12 months has been $21.54/barrel, which is the most expensive on record. Brent’s premium to Dubai, or the spread of prices between sweet and salt grades, reached an all-time high on Wednesday at $12.93/barrel, according to trader.

Demand for Middle East oil has risen, with benchmark crude prices jumping more than 50% to the beginning of March.

Due to the wide spread of benchmarks and surging freight rates, oil tankers around the world have made it increasingly difficult for Asian buyers purchase oil from Europe, Africa, or the United States. This has limited their options.

Middle East crude oil price benchmarks https://fingfx.thomsonreuters.com/gfx/ce/byprjeqnlpe/MidEastCrudeBenchmarks.png

The sources stated that Asian and European refiners will look for more oil supplies from the Middle East, and the United States, to replace crude from Russia or Central Asia. However, official selling prices in April for crude from Saudi Arabia have reached record highs.

According to a Singapore-based trader, “Freight costs for the Middle East and Asia are also higher so it depends which is more painful.”

Brent-Dubai’s reach is also increasing. Arbitrage to Asia might be affected.

Russian oil buyers faced difficulty securing financing as the major banks had stopped issuing credit guarantee. While Brent crude oil from Russian Urals is discounted at an all-time high, prices for Russian ESPO crude and Sokol crudes have fallen.

Eastern European crudes see price plunge after Russian invasion of Ukraine, Western sanctions https://fingfx.thomsonreuters.com/gfx/ce/gdpzybmjxvw/BrentvsEastEuropeCrudes.png

Globally, oil tanker freight rates have risen, particularly for vessels calling at ports in Turkey and the Black Sea. This could potentially impact exports from Kazakhstan of CPC Blend and Azeri light from Azerbaijan.

According to a Singaporean senior oil trader, trading firms will likely have to use long-term charter vessels to carry these cargoes.

He said, “Ship owners have a lot of fun.”

Oil tanker rates surge from Black Sea & Baltic after Russia sanctioned over Ukraine invasion https://fingfx.thomsonreuters.com/gfx/ce/klvykbnlqvg/OilTankerRatesMar22022.png

Analysts and traders said that Asia and Europe will likely increase imports from the Americas as they are cut off from traditional supply sources.

Traders said that U.S. Mars crude and West Texas Intermediate crude oil for May delivery has more than tripled, to $16 per barrel respectively. This puts Asian buyers at risk.

“The recent geopolitically-driven outperformance of Brent relative to WTI means that the North American benchmark has catching up to do in order to shut the door on exports, given that U.S. balances are tight, particularly with Cushing approaching operational tank bottoms,” RBC Capital analyst Mike Tran said in a note.

Crude stock levels at Cushing’s Oklahoma storage hub are down to their lowest level since September 2018.

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