Page 4 - FSUOGM Week 10 2022

FSUOGM COMMENTARY FSUOGM

US Biden embargoes Russian oil,

UK to phase out by end-2022

For the time being, the US' allies in Europe are holding back on such action

US + UK US President Joe Biden has stepped up the time, Russia is the largest exporter of crude oil to
sanctions against Russia's military invasion of the EU, accounting for 27% of imports in 2019.
WHAT: Ukraine, announcing an embargo on imports of Russian oil and gas exports account for 4.5%
The US and the UK Russian oil to the US. At the same time, Biden of the globally consumed energy, Kevin Book
are ending oil and gas said he understands that allies in Europe would of ClearView Energy Partners estimated for
purchases from Russia. not be able to join the ban on Russian oil and is Bloomberg, warning that "a broad and strict
mindful of the impact on gas prices at the pump transatlantic ban on Russian oil and gas exports
WHY: at home. could raise energy prices well beyond the gas
The aim is to target By targeting “the main artery of the Russian pump."
"the main artery of the economy”, the American people are dealing US imports of Russian crude and oil products
Russian economy." “another powerful blow to Putin’s war machine”, averaged 671mbpd in 2021, according to EIA
Biden said in a live announcement streamed by data (199mbpd of crude and 473mbpd of refined
WHAT NEXT: the White House. products). US imports of Russian crude and oil
The moves will make the In the meantime, the British government products had averaged c. 57mbpd YtD, accord-
market tighter, although has said it will phase out Russian oil imports by ing to EIA data, with most of the products being
Russian oil will be sent to the end of the year, according to the Guardian. fuel oil, naphtha and heavy crude to be used as
other destinations once The UK business minister Kwasi Kwarteng also feedstock, according to Reuters.
shippers and insurers said he was exploring options to end Russian gas Using Russian Customs Service data, Russian
understand the sanctions imports to the UK, currently about 4% of supply. crude exports averaged 4,387mbpd in 2021, and
risk. As followed by bne IntelliNews, the US pres- oil product exports averaged 2,876mbpd in 2021.
idential administration officials were discussing Though not exact, US crude imports accounted
with the US oil and gas industry how a ban could for about 5% of Russia’s total crude exports and
affect American consumers and global energy 17% of its oil product exports in 2021.
supplies. While calls for an embargo of Russian “However, the oil market is more adaptable
oil and gas gain traction in the EU, Germany is than the gas market, as crude and oil products
resisting the measure. shipped via tanker can change destination,
Prior to Biden's announcement the prospects and the global market can make changes when
of the oil ban from the US sent the Brent price countries no longer source hydrocarbons from
per barrel to a multi-year high of $130, while the previous suppliers, we think. After sanctions on
ruble sank to new record lows of RUB150 per US Venezuela ended exports to the US in 2019, Rus-
dollar. sia started to export more fuel oil to the US as a
"We think that a complete ban on Russian feedstock, which was also beneficial since there
energy imports would cause the prices of Brent were already concerns before IMO 2020 created
crude oil and European natural gas to surge to demand issues for Russian fuel oil. With the new
$160 per barrel and €300/MWh [per barrel] in ban on imports of Russian crude and oil prod-
the near term and settle at still very high levels ucts, US refineries will have to source new heav-
into next year," Capital Economics said in a note ier feedstock for refining, on our understanding,”
on March 7. Sova Capital said in a note.
As a result of the ban, the Russian economy On top of the US ban, the UK could start to
would contract by as much as 25%, causing sov- phase out Russian oil and oil product imports,
ereign and corporate default risks to crystallise, according to Interfax. Shell and BP announced
Capital Economics warns. In the meantime, they would no longer buy additional Russian
inflation in advanced economies would end the oil, Bloomberg reported, but the companies are
year at around 5% as opposed to the 2.4% the unable to exit some long-term contracts.
analysts had forecasted prior to the invasion of TotalEnergies has already stopped purchases
Ukraine. of Russian oil. We are also now seeing news
Capital Economics also warns that the effects about Russian oil companies having difficulties
of the drop in households’ spending power and selling Russian oil.
power rationing in Europe would push the euro- “The should add to the tightness on the global
zone into recession. oil market, but we could see purchases of Russian
Russian oil made up about 3% of all US oil oil resume being sent to destinations outside of
imports in 2021 and accounted for about 8% if the US once shippers and insurers understand
various oil products are considered. At the same the sanctions risk,” Sova Capital added. ™

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