Oil prices spiked today on Iran nuclear deal delays and the increasing likelihood of bans on Russian crude imports.

Here is Rystad Energy’s oil market comment from our Senior Oil Market Analyst Louise Dickson:

Oil prices surged this morning to highs not experienced since 2008 as bans on Russian crude seem more likely, and delays in a US-Iran deal raise questions about supply relief.

The US is staring down the barrel of a supply crisis, with gasoline prices already soaring nationwide, and the Biden administration appears open to exploring alternative sources such as Venezuela, where sanctions have kept crude imports off the market for years.

To date, the West’s financial sanctions against Russia have not proved effective in de-escalating the conflict in Ukraine.

Expanding sanctions to include physical commodities, including Russian oil exports, is definitely on the table.

The impact of a US unilateral ban would be minimal, only impacting about 100,000 bpd of crude exports from Russia.

If the US can encourage Europe to participate in the embargo, the continent would be blocking about 3.8 million bpd monthly average of Russian crude imports.

The EU agreeing to an outright ban on Russian oil is unlikely given its member’s dependence on the fuel.

The daily operations at many European refineries rely on a Russian crude diet, mainly imports of Urals.

Italy, the Netherlands, France, Romania, and Poland are some of the largest importers of Russian crudes, and many of these countries have continued to receive deliveries that were fixed before the invasion of Ukraine, fulfilling already completed transactions, as the time lag between orders and loadings is usually in 10 or 25-day intervals.

An outright export ban on Russian crude from Western countries could wipe out as much as 4 million bpd, and participation from China and India would take even more barrels off the market.

In addition to Russian barrels at risk of upstream disruption, regional producers Kazakhstan and Azerbaijan, which send a large portion of their exports to the global market via Russian pipelines and ports, are also in jeopardy.

Kazakhstan sends significant volumes of its light-sweet CPC blend that it produces at the Tengiz, Karachaganak and Kashagan via Russia, but a small portion goes directly to China and would not be affected. 

Azerbaijan sends its BTC blend produced offshore in the landlocked Caspian via the Baku-Novorossiysk pipeline, and there are few alternatives for rerouting. 

In total, the FSU countries export about 6 million bpd from Russian ports and pipelines.