Russia-Ukraine roundup: another day of soaring oil prices

Oil prices surged again on Wednesday, with the CME ultra-low sulfur diesel contract settling at its highest level since late July 2008.

Markets continue to react to a scenario not featured in many forecasts of what could happen in the event of a Russian invasion of Ukraine: a self-selecting embargo in which Western sanctions on Russian imports to key countries are proving useless so far.

In ULSD trading on CME, the first month price for April barrels was $3.4947 per gallon, an increase of 34.36 cents per gallon, or 10.9%. The outright increase is believed to be the highest one-day move in the history of the contract, which traded fuel oil before becoming a diesel contract, as fuel oil and diesel specs are for the most aligned.

The settlement was also just below the highest trade of the day at $3.5001, a signal that the market was moving higher as the day progressed.

The aversion to Russian crude and products is not even limited to exports from this country. For example, CPC Blend is Kazakhstan’s benchmark crude. S&P Global Commodity Services (SPGCS), which includes Platts’ oil reporting business, rated CPC Blend at its lowest level against the dated Brent benchmark in nearly two years.

Although the oil is produced and blended in Kazakhstan, it is exported from the Russian port of Novorossiysk.

“Western shipowners and businesses most certainly care which loading port they are going to,” SPGCS quoted a trader as saying.

The self-sanction can also be seen in the Energy Information Administration’s weekly statistical report. He reported that imports of Russian crude oil into the United States for the week ended last Friday fell to zero.

This figure is not in itself unusual. It was zero in the last week of 2021 and the first three weeks of 2022. It also fell to zero four other times in 2021. And before October 2020, it had been zero every week since the beginning of 2013.

How long can the world continue to turn away from Russia is the main question in the market. According to BP’s statistical review released last year, Russia exported an average of 8.38 million barrels per day in 2019, the last pre-pandemic year, and 7.43 million barrels per day during the year. 2020 low demand.

While all of this is not in jeopardy – for example, early reports indicated that the Druzhba pipeline that crosses Ukraine and transports Russian crude to Eastern Europe was still operating – it seems doubtful that it there are other sources of oil that could be a significant drop in Russian exports for a long time; this is one of the main reasons why oil is so much higher.

John Kemp, who covers oil and energy for Bloomberg Opinion, said in a column Wednesday morning that traders believe at least 2 million barrels a day of Russian crude exports are not finding a home.

The most significant measure taken in response to the willful loss of Russian oil supply is a decision by Western countries operating under the banner of the International Energy Agency to release 60 million barrels of crude from their strategic stocks. respective.

Critics of this decision have focused on the fact that the 60 million barrels do not even cover a day of global consumption. But the IEA, in its most recent report, noted that inventories in Organization for Economic Co-operation and Development countries in December fell by 60 million barrels, which it called in its monthly report “strong”. Viewing new supplies coming out of strategic stocks as a replenishment of inventory rather than a one-to-one supply straight into consumption shows the importance of the movement.

Wholesale diesel prices Wednesday morning were up more than 30 cents from the start of the week, averaging $3.305 a gallon, according to the ULSDR.USA data feed in FreightWaves’ SONAR.

Tom Kloza, a well-known oil analyst at OPIS, which is a key source of wholesale data, tweeted midday Wednesday that wholesale intraday prices were showing significant gains.

In other supply chain developments impacted by Russia’s invasion of Ukraine:

LNG by rail to the rescue?

U.S. liquefied natural gas exports to Europe set a record in January, and they’re going to be seen as a key source to fill any hole left by a loss of Russian natural gas shipments to Europe (which aren’t not yet specifically sanctioned). However, there has always been controversy over the safety of LNG rail shipments.

Railway Supply Institute spokesman John Hebert jumped into the fray with the release of this statement: “If Europe ends up facing an even more serious energy crisis as a result of this, we should consider how the United States can increase exports to help alleviate shortages. in Europe. As part of this, we will also urge the Biden administration to reconsider its decision to suspend the safe transportation of liquefied natural gas by rail to help increase our LNG export capacity. —Joanna Marais

DOT’s Buttigieg offers support to Ukraine

Transportation Secretary Pete Buttigieg confirmed during a Senate committee hearing Wednesday that just before President Joe Biden’s State of the Union address, he spoke with Ukrainian officials about the role the Ministry of Transport could play in the Russian-Ukrainian situation.

“This is the topic of a conversation I had late yesterday afternoon with my counterpart, the Ukrainian Minister of Infrastructure, as well as their ambassador in Washington,” Buttigieg told the Senate Senate Committee. environment and public works, answering a question of the classification of the commission. member, Shelley Moore Capito, RW.Va.

“One of the things we discussed was something that [Ukraine] asked, what the president announced last night: the closure of American airspace to Russian planes. There may be other measures that would be appropriate and within our powers. Obviously, this situation is changing rapidly, so we are moving quickly to assess them. But I think there are a number of things around infrastructure, and certainly around travel, that we need to look at as a way to deliver on our commitment to support the people of Ukraine.

Buttigieg added that he is also “in frequent contact with many of my counterparts among our allies and partners to see what they are doing, what we could do and how best to coordinate.” —John Gallagher

Slowdown in commodity exports

Container ships are experiencing departure delays at ports in the Netherlands, Belgium and Germany as authorities conduct searches for restricted products, mostly dual-use technologies, which the US and EU have banned exports to Russia under new licensing requirements. The inspections cover the export and transshipment of goods, according to the shipping company Maersk. —Eric Kulisch

Stopping the assembly line

Toyota said it stopped production of the RAV4 and Camry models at its St. Petersburg assembly plant. It also closed all retail outlets in Russia. —Eric Kulisch

In other FreightWaves reporting on the Russian invasion of Ukraine:

The second cold war is here – and supply chains will be the front lines

North American rail equipment manufacturers are keeping a close eye on Ukraine-Russia

Steve R. Hansen