The ban on Russian crude oil took effect on Dec. 5, and the measures targeting Moscow’s refined petroleum products will be implemented on Feb. 5, 2023.
According to political risk consultancy Eurasia Group, the ban is expected to cause significant market dislocations and have a more disruptive effect than previous EU crude-import sanctions. The EU and its G-7 allies are also reportedly considering a $100 per barrel price cap on premium Russian oil products and $45 on discounted products like fuel oil and industrial lubricant oil.
Supply and Demand Rerouting
Energy analysts expect some rerouting of flows, with Moscow sending more barrels to China, India, the Middle East, and Africa, and Europe ramping up imports from India, China, the Middle East, and the US. The Economist Intelligence Unit also predicts upward pressure on prices for oil products.
Oil Imports by China and India
The EU has urged India and China to support a price cap on Russian oil; however, India’s oil imports were reported to have increased to a five-month record in Dec., and China was seen as the second-largest buyer of Urals in January.
Shipping and Pricing Issues
Shipping and pricing issues are key concerns regarding the EU’s ban on Russian oil product exports, and the seaborne transport of Russian oil products is thought to be more difficult. Tankers must be deep cleaned when switching from carrying one fuel to another, such as from gasoline to lubricants, and it also requires more vessels than the crude sector.