OIL FUTURES: Brent hits 14-year high on fear of Russian oil import bans

ICE Brent crude futures hit a 14-year high in early London trading March 7 after US officials signaled over the weekend that it and its allies are discussing a coordinated ban on imports of Russian oil.

At 0835 GMT, the ICE Brent futures contract for May was trading $9.17/b (7.76%) higher at $127.28/b. It hit $130.89/b earlier on in the session, which was the highest since July 22, 2008.

"Russia exports oil to many countries," said Richard Joswick, head of global oil analytics, S&P Global Commodity Insights. "The largest importing region is Europe (2.7 million b/d of crude oil and 1 million b/d of oil feedstocks/products). Next is into Asia, mostly China, at 2.3 million b/d of crude and products. The third largest importing region is the United States at 0.6 million b/d."

Russia, which has been subject to major international financial sanctions since its invasion of Ukraine began Feb. 24, produced on average 10.52 million b/d in 2021, equal to just more than 10% of global consumption. So far, Russia's OPEC+ allies Saudi Arabia and the UAE have avoided being drawn into the mounting international actions against Kremlin and have not offered to meet shortfalls in supply.

Of the 23-country alliance, only Saudi Arabia and the UAE hold any significant spare production capacity, though both countries have so far been unwilling to breach their quotas. But this falls considerably short of the 6.5 million b/d of crude Russia exports on average.

"Restrictions, on importing Russian oil, if implemented, would have very different effects on supply depending on the region and whether it is crude or products, but all markets will see a price impact," Joswick said.

"For Europe, apart from crude oil, one key issue is the supply of diesel oil from Russia. If a ban were placed on such imports Europe could release some of its roughly 200 million barrels of diesel in strategic stocks to help cover," he added.

US Secretary of State Antony Blinken told CNN March 6: "We are now talking to our European partners and allies to look in a coordinated way at the prospect of banning the import of Russian oil."

Russia was the third-largest source of crude oil imports to the UK, accounting for around 11% of foreign supply, according to government data. Russia was the second-largest source of imported oil products, equal to 16% of the total, the data showed.

"For the United States, the largest affect might be for US Gulf Coast refiners who import VGO/residual feedstocks from Russia which they use to produce light products such as gasoline or diesel. Loss of those feedstocks would lead refiners to seek other sources which could be challenging or run more crude oil," Joswick said.