(Bloomberg – As tensions rise over Ukraine, oil importers rush to determine the potential risk of Russian supply as they race to estimate their risks. 

Traders and buyers of Asia’s favored oil grades from Russia, particularly ESPO and Sokol from the far east, are becoming increasingly wary of being caught up in possible trade restrictions should the OPEC+ producer be sanctioned, they said. Market participants indicated to Bloomberg that this is unlikely, but they are reconsidering their procurement plans for April. 

Many European buyers said that they still have to wait for the Ukraine crisis’ full effect. Prices are already taking a hit though, with Urals crude in Europe plunging to the biggest discount to forward Dated since April 2020, according to S&P Global (NYSE:) Platts data for Friday. That’s in stark contrast to strength in almost every other corner of the oil market.

Asia-focused grades were holding well. Sokol reached its largest premium in 2 years, thanks to strong gasoline/diesel margins, as well as divergence in crude oil benchmarks. Traders and the ESPO trading cycles that begin this week will closely be watching the Sokol tender.

According to traders, the potential beneficiaries of Asia’s decision not to buy ESPO or Sokol will be crude from Saudi Arabia and Abu Dhabi. Buyers are likely to ask for supplies in excess from the Kingdom, since they can be sold long-term. Or, turn to Abu Dhabi Murban supply spots.

With West Texas Intermediate and North Sea oils becoming less attractive alternatives to Middle East oil, the West Texas Intermediate has risen in demand and makes these grades more expensive than Middle East ones. The prices of nearby commodities are at high premiums to those in the future, making such cargoes less attractive to buyers from regions where shipping takes longer. 

Trade restrictions or sanctions against Russia are likely to push crude oil prices up, which would be a result that is not popular in America and around the globe. Since the beginning of the year, oil has gained over 20% as the demand for it rebounded due to the opening of other economies. Any interruption in trade flow will only worsen the effect of rising inflation on economic growth and the economy. 

Volodymyr Zeleskiy, Ukrainian President, caused panic in markets. His office later claimed that it was meant as a humorous comment on the rest of the world’s predictions for a Russian attack. The U.S. told citizens to depart Belarus Tuesday, citing “unusual and concerning Russian military buildup along Belarus’ border with Ukraine”. 

Asia also imports a lot of Russia’s refined oil products, such as gasoline, naphtha, and diesel. The Black Sea port at Tuapse, Russia is a major source of Russian naphtha. Trade restrictions could raise prices, sending the product along the same upward trajectory that fuels like gasoline or diesel. 

(Updates with the most recent on Russia-Ukraine at penultimate para.

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