Markets are bracing for more disruption while Europe reinforces ‘oil war’ against Russia

The European Union’s  ban on Russian oil product exports is slated to kick in on Feb. 5. It is thought that the EU’s embargo on Russian petroleum products will be both more complex and more disruptive than what has come before, notes CNBC.

Europe is once again poised to ratchet up the pressure on Russia’s oil revenues, but some energy analysts are worried that the proposed measures could cause “significant market dislocations.”

As part of the European Union’s sixth package of sanctions against Russia, adopted in June last year, the 27-member bloc imposed a ban on the purchase, import or transfer of seaborne crude oil and petroleum products from Russia.

The restrictions on Russian crude oil took effect on Dec. 5, while the measures targeting Moscow’s refined petroleum products  apply from Feb. 5.

Analysts at political risk consultancy Eurasia Group warned the EU’s imminent ban “will probably have a more disruptive effect than previous EU crude-import sanctions.” “If it is introduced, it would be potentially creating more confusion in the market,” analysts at Eurasia Group said.

“We expect some disruption, especially in the immediate aftermath of the ban as EU markets continue to line up alternative supplies,” Matthew Sherwood, an analyst at the Economist Intelligence Unit, told CNBC. “We also expect this to put upward pressure on prices for oil products more generally.”

Energy analysts had been skeptical about the impact of the G-7 price cap on Russian oil, particularly as Moscow had been able to reroute much of its European seaborne shipments to the likes of China, India and Turkey.

The EU urged India and China to support a price cap on Russian oil. Nonetheless, India’s oil imports were reported to have jumped to a five-month record in December as the country actively ramped up its purchases of Russian crude, while China was seen as the second largest buyer of Urals in January.

“The impact of sanctions on Russian crude exports after two months of the European Union embargo has not been as devastating as some predicted,” Stephen Brennock, senior analyst at PVM Oil Associates in London, said in a research note.

His comments come shortly after Reuters reported that oil loadings from Russia’s Baltic ports were poised to jump by 50% in January from December. “Not bad for the world’s most sanctioned country.”  

Kremlin spokesperson Dmitry Peskov previously said a Western price cap on Russian oil would not affect its ability to sustain what it describes as its “special military operation” in Ukraine.

“Once the EU embargo on Russian seaborne fuel exports kicks in, we are likely to see prices for gasoline and especially diesel remain supported by tightening supply – not least if the embargo is being followed up by a $100 per barrel price cap on diesel,” Ole Hansen, head of commodity strategy at Saxo Bank, said in a research note.

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