The market reacts to potential loss of Russian oil
March 7, 2022
The market jumped much higher when it opened Sunday night. The main reason is all the talk about banning Russian energy export or purchases. This news is the main driver today as the potential loss of these barrels has buyers of oil scrambling. The US sent a contingent to Venezuela this weekend to talk about easing sanctions and buying more oil from then.
China said it will continue to trade normally with Russia and stated Russia is its most important ally.
Europe is the major imported of Russian oil, roughly 4.5 million BPD. Russian crude exports are roughly 6.6 to 7 million BPD and with the current stock levels and limited spare capacity these barrels will be very difficult to replace.
The US piece of the Russian exports is not substantial but since the US needs mostly heavy sour crude that creates a bit more of a challenge, and that is why we went to Venezuela over the weekend as they used to be one of the main supply sources for heavy crude to the US. This heavy sour crude is the challenging part. The refined product that comes to the US from Russia could be relatively easy to replace with an increase in refinery runs.
The Russian and Ukrainian conflict is the main driver of prices, and the volatility will continue to be very high. Already today WTI crude oil has a 14.96 cent range, ULSD a .4250 range, and gas a .6469 range.