Russia-Ukraine roundup: Big surge in price of oil

This summary of supply chain-related developments connected to the Russian invasion of Ukraine has been compiled by FreightWaves editorial staff members. 

Oil: After relative restraint, prices jumped Monday

When the CME commodity exchange settled Friday, the price of ultra low sulfur diesel (ULSD) was $2.8495 a gallon. That was a grand total of 1 cent higher than where it was on Feb. 3 following weeks of up-and-down swings on the back of the buildup to the Russian invasion of Ukraine and the incursion itself.

But Monday, prices soared. ULSD settled for the day at $3.0134 a gallon, a gain of 16.39 cents per gallon, up 5.75% from the Friday settlement.  It’s the first settlement above $3 since June 2014.

There have been no sanctions specifically targeting Russian oil exports. Companies and traders are free to buy as much as they want.

But there were numerous reports over the course of the day that traders were shying away from making Russian purchases. Whether it was a fear of being chastised for dealing in Russian products, or the difficulty in working with Russian banks on transactions, a term developed in online discussions: “self-sanctioning.”

This cannot go on endlessly. Russian exports roughly 4 million barrels a day of crude and products to Europe and about 400,000 barrels a day to the U.S. Unlike the 1990 Iraqi invasion of Kuwait, when the entire world then embargoed Iraqi and Kuwaiti exports, there is not enough spare capacity in the world to make up for removing Russia from the list of the world’s suppliers, regardless of whether it is through formal sanctions or simply by individual company decision. 

In the meantime, the prospect of losing a significant share of oil from the world market as a result of self-sanctioning or the fallout from financial sanctions making Russian oil difficult to move is a key factor in helping to boost the price. — John Kingston