Oil Markets Fret Over Supply Shock As Some Buyers Shun Russia

While the West debates potential restrictions on Russian oil and gas, there are signs some buyers are already shunning them, fuelling market jitters about a potentially huge supply shock.

Russia is the world's top exporter of crude and oil products combined, at around 7 million barrels per day (bpd) or 7% of global supply.

While Western governments have imposed unprecedented sanctions on Moscow over its invasion of Ukraine, they have so far not directly targetted its energy sector because of the damage that would inflict on their own economies.

However, two people familiar with the matter told Reuters the United States was willing to move ahead with a ban on Russian oil imports without European allies.

And some buyers appear to be shunning Russian oil anyway to avoid reputational damage or possible legal troubles - although estimates vary widely about how much this is happening.

Shell said on Tuesday it would stop buying Russian crude and phase out its involvement in all Russian hydrocarbons, becoming one of the first major Western oil companies to abandon Russia entirely.

Goldman Sachs, meanwhile, estimated that more than half of Russian oil exported from ports remained unsold.

"If sustained, this would represent a 3 million bpd decline in Russian crude and petroleum product seaborne exports," it said on Tuesday.

JP Morgan estimated around 70% of Russian seaborne oil was struggling to find buyers.

"Shipping disruptions in the Black Sea have brought trade deals with the country to a virtual standstill," the bank said on Tuesday.

BCA Research analysts also said some private companies were boycotting Russian energy, but it saw less of an impact so far.

"Estimates vary but about 20% of Russian oil exports could be affected so far," BCA said, adding Russian crude could still make its way to markets such as China.

Kpler said it was seeing little change in Russian crude loadings, excluding CPC grades, beyond normal day to day variations. But it said there were signs a growing number of cargoes were going to sea unsold.

"At this point in time this is a developing trend and we are yet to see levels increase significantly beyond 'normal' market patterns," said Alex Booth, head of research at Kpler.

Cuneyt Kazokoglu, head of oil demand analysis at FGE, also said at the end of last week there had been minimal disruption to actual loadings or unloadings of Russian oil.

But he forecast 4.5 million bpd of Russian seaborne oil, together with possibly up to 1.3 million bpd of Kazakhstan's CPC crude grade loadings in the Black Sea, could be disrupted if the war continues.

In 2021, energy was the most imported product by the European Union from Russia, accounting for 62% of total EU imports, or the equivalent of about 99 billion euros ($108 billion).