In their broadside of sanctions on Russia, the U.S. and its allies are going out of their way to spare energy shipments and keep economies humming and voters warm.
The oil market went on strike anyway. Acting as if energy were in the crosshairs of Western sanctions officials, refiners balked at buying Russian oil and banks are refusing to finance shipments of Russian commodities, according to traders, oil executives and bankers.
The self-imposed embargo threatens to drive up energy prices globally by removing a gusher of oil from a market that was tight even before President Vladimir Putin attacked Ukraine. Russia, waging war and in need of revenue with its financial system in turmoil, is taking extreme steps to convince companies to buy its most precious commodity.
Before refiners and banks are certain they won’t fall afoul of complex restrictions in different jurisdictions, they won’t do business with Russian oil, traders and others involved in the market say. Market players also fear that measures that target oil exports directly could land as fighting in Ukraine intensifies. . . .
Brent-crude futures, the benchmark in international energy markets, rose more than 7% Tuesday to almost $105 a barrel. In a sign that demand for Russian oil has evaporated, prices for the country’s flagship Urals crude moved in the opposite direction.
Traders are offering Urals at massive discounts—as much as $18 a barrel below the price of Brent—and even then not finding buyers. A drop in the price of Espo, a grade of Russian crude popular in Asia, suggests refiners in Japan and South Korea are hitting pause on purchases alongside those in Europe and the U.S.
“The market is starting to fail,” said a person at a major commodities trading house.
Companies including Vitol and Trafigura Group Pte. Ltd.—among the world’s biggest independent oil traders—hold Russian oil bought under long-term deals. They were unable to sell Tuesday, people familiar with their operations say.
In Europe, Swedish refiner Preem AB and Finland’s Neste Oyj say they have stopped Russian oil purchases and mostly replaced them with Northern European oil purchases. Valero Energy Corp. , a Texas-based refining company, has suspended all future purchases of Russian oil, people familiar with the decision said.
For now, Russia is exporting about as much oil as it was on the eve of Thursday’s invasion. But those flows, based on sales made before the war, will slow drastically in the coming weeks once cargoes have been delivered, traders and analysts say.
