Oil sanctions splitting global market, boosting 'grey' trade movements: TotalEnergies' Pouyanne

Sanctions against Russia have split the global oil market, fostering the growth of a "grey" market and pushing up prices, TotalEnergies CEO Patrick Pouyanne said Feb. 8 after the stepping up of measures against Moscow by the EU and G7 countries following the invasion of Ukraine.

Referring to measures by the EU and G7, Pouyanne said at an investor presentation: "There is no more a world oil market. That is the big lesson of what's happening."

"We are splitting the market between Europe -- they have bans, there are some caps on prices -- we have today several markets, which does not help ease the price" of oil, Pouyanne said, going on to predict a potential return to prices above $100/b oil.

"We did not assess all the consequences of the growing grey markets for the supply of oil," he said.

On oil prices, Pouyanne said: "From our perspective there is more support for a higher price than $80 than a lower one. I would not be surprised to see $100/b coming back."

It follows the entry into force of an EU ban on Russian oil product imports on Feb. 5 and an earlier ban on Russian seaborne crude oil imports to the EU.

An agreement announced Feb. 3 by the G7 and partner countries will impose price caps of $100/b on imports of Russian products that typically trade at a premium to crude and $45/b on products like fuel oil that generally trade at a discount to crude.

TotalEnergies was previously stung by criticism that it was too slow to take a stance on the invasion of Ukraine and has since moved to dispose of several Russian assets. It retains, however, a 20% stake in Yamal LNG and continues to buy Russian LNG under a long-term offtake agreement.

In a fourth-quarter results statement, TotalEnergies noted an "uncertain environment," but also the efforts of the OPEC+ producer group to maintain prices above $80/b.

"The possible worldwide economic slowdown could be counterbalanced by the recovery of China, global demand being expected to rise in 2023 to more than 100 million b/d," the company said.

"Refining margins in Europe, particularly for distillates, are expected to remain supported by the effects of the European embargo on Russian petroleum products from Feb. 5."