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Oil prices spike even higher amid 'de facto ban' on Russian crude

Ines Ferré
·Senior Business Reporter
·2 min read

Oil prices spiked even higher on Tuesday, but one grade of crude is having trouble catching a bid: Russian Urals.

“It's become toxic,” Andy Lipow, president of Lipow Oil Associates, told Yahoo Finance. “I call it the 'de facto ban' on Russian oil.”

Even though Western sanctions against Moscow excluded energy transactions, traders are staying away from Russian crude amid the continued invasion of Ukraine. Touching it, says Lipow, could mean a “public relations nightmare.”

The Urals grade, Russia’s main export, has recently been trading at a record discount in Europe, more than $18 below the Brent International benchmark.

“The insurance companies, the tankers for example in the Black Sea, the companies that are in trade finance, the banks, and even the multinational oil companies, do not want to take the risk of committing for something and sending a vessel there and then finding out that they're sanctioned or that there will be some punitive measures,” said Tom Kloza, founder of Oil Price Information Service.

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On Tuesday Brent (BZ=F) crude futures surged for a third straight session, settling at $112.93 a barrel. U.S. West Texas Intermediate (CL=F) closed above at $110 a barrel for the first time since 2011.

The market "is pricing in the loss of substantial amounts of Russian oil,” said Kloza.

Even Beijing, an ally of Moscow, has yet to come in and scoop up all of the excess Russian oil on sale.

“I might argue that if China stepped in to be a big buyer of Russian crude oil, they would not buy other sources of crude oil that could be redirected to Europe. And the impact on overall supplies would be less, but we’re not there yet," said Lipow.

“China is stuck. They depend on Russia for a lot of their energy but depend on the United States and Europe to buy their stuff,” he added.

Ines is a markets reporter covering stocks and commodities. Follow her on Twitter at @ines_ferre

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