How big a "hole" will the embargo on Russian oil leave in the market?

In the absence of the participation of other European allies, the United States and the United Kingdom announced a ban
on the import of Russian energy.
In fact, before that, market participants had been afraid to pay attention to Russian crude oil, which some traders called "spontaneous sanctions"
.
Confused about what the law would allow and fears of reputational damage or moral reprimands, banks are withdrawing trade finance related to Rosneft, and tanker companies are reluctant to ship Russian oil
.
The superposition of these factors is actually no different from the "embargo", given that Russia is one of the world's top three oil exporters, the embargo on it may leave a "big hole"
in the oil market.

1.
What is the cause of the interruption?

Given the financial sanctions imposed on Russia by the United States, the United Kingdom, and the European Union, market participants are wary
of making deals with Russia, even though the energy market itself is largely exempt.
Many tanker owners – often companies with relatively small compliance departments – intend to act
conservatively until the overall picture is clear.
That would be a fatal blow to Russia, which has oil as a pillar of its economy, because nearly two-thirds of its oil sales are shipped by sea
.
Some traders have also noticed the negative publicity
.
After Shell bought Russian Urals crude on March 4, Ukrainian Foreign Minister Al Quleba took to Twitter to question the company that "Russian oil smells like Ukrainian blood.
"
Four days later, Shell admitted that the decision to buy oil was wrong and said it would not buy new oil and gas
from Russia again.
BP made the same commitment
.

2.
What is the impact on prices?

At the beginning of the Russian-Ukrainian conflict in early March, the oil market went into a frenzy as buyers scrambled to find alternative supplies, with Brent crude breaking through $
110 a barrel for the first time since 2014.
What's more, the market has seen one of the largest spot premiums ever, namely spot contract prices much higher than forward prices
.

3.
How much will Russia's oil supply be reduced ?

There are no fixed numbers
.
But consulting firm Energy Aspects estimates that as of March 2, about 70 percent of Russia's crude oil trade had been frozen
.
Russia's previous daily crude oil exports have been around 5 million barrels, equivalent to 5% of global consumption, and refined oil exports are close to 3 million barrels per day, including key fuels such as diesel, fuel
oil and petrochemical feedstocks such as naphtha.
Once the scope of the sweeping sanctions becomes clearer, Energy Aspects expects that Russia's frozen share of crude oil trade could drop to around 20 percent before the U.
S.
imposes an import ban, as traders enter Asia to buy oil
.

4.
What did the United States and the United Kingdom do?

U.
S.
President Joe Biden said the U.
S.
would ban imports of fossil fuels from
Russia, including oil.
Last year, Russian crude oil accounted for about 3% of U.
S
.
crude oil imports.
The UK ban, which applies to all Russian crude oil and refined products, is scheduled to be phased in by the end of the
year.
About a third of Britain's diesel imports come from Russia
.
The country's latest ban does not include natural gas
.

5.
What can be done to fill the hole?

The International Energy Agency (IEA), which represents major industrialized countries, announced plans on March 1 to put 60 million barrels of oil in its stockpile, half of which comes from the U.
S.
Strategic Petroleum Reserve and the rest from Europe and Asia
.
This size is equivalent to Russia's frozen crude oil shipments for about 17 days, and the IEA may also increase the amount of
inventory.
In total, the organization's member states hold nearly 1.
5 billion barrels of national crude oil reserves
.

6.
Can I get more oil from other sources?

There are several possible sources
of additional supply.
If the nuclear negotiations between the world powers and Iran are successful, and Iran is willing to limit its nuclear program in exchange for the lifting of oil sanctions by the United States, then Iranian crude oil has hope to enter the market
.
So far
.
OPEC+ still refuses to accelerate production
increases.
At the meeting in early March, they insisted on a modest increase of 400,000 bpd in April
.
There is also spare capacity in the United States, and producers have been restricting production increases in recent years under pressure from investors
.
The United States has recently been negotiating with Venezuela, suggesting that there could be a major shift
in U.
S.
attitudes toward the socialist government.

7.
What are the implications for the Russian energy sector?

The U.
S.
government has said it wants to weaken the country's position
as the world's leading oil and gas power by restricting technology exports to Russia's energy sector.
Some of the world's largest oil companies, including ExxonMobil, BP Plc, Shell and others, have pledged to exit the Russian market
.
France's Total Energy said it would not sell its Russian business at this time, but it would no longer fund
new projects there.
Total holds about one-fifth stake in Gazprom Novatek PJSC and has a significant interest
in Yamal LNG, Russia's largest liquefied natural gas project.

8.
What is the status of Russian gas exports?

While oil can be replaced to some extent with oil from other countries, natural gas is more difficult
.
That's because gas delivery requires a vast infrastructure network that relies on pipeline supplies
from Russia.
The supply of natural gas by liquefaction and shipping is far from comparable to
pipeline natural gas supply.
As a result, Russia's natural gas is still piped to Europe, and the region relies on Russia's state-owned energy giant, Gazprom
.
The company supplies about a third
of Europe's total consumption.

9.
Are there long-term options in Europe?

Potentially
.
The European Commission is studying measures to try to make the EU free of Russian gas, but some will take years to implement, and the IEA said in a report that without compromising climate goals, the EU can reduce Russian gas imports by a third
by increasing fuel purchases to other countries, accelerating the promotion of renewable energy and improving energy efficiency.
The proposed measures also include an increase in nuclear power generation
.