Fresh Eight-Year Highs In Asia As Sanctions On Russia Bite

WTI and Brent are ~$5.00 higher at typing, back from best levels after briefly showing above $109.00 & $111.00, respectively, with crude registering another round of fresh cycle highs during Asia-Pac hours. Both benchmarks have caught a strong bid as it becomes clear to participants that western sanctions on Russia have had a larger than expected impact on Russian crude exports.

• To elaborate, Russia’s Ural oil grade trades at discounts to Brent not witnessed in the post-Soviet era, as several buyers have opted to avoid Russian oil altogether despite relevant carve-outs and exceptions in the current range of western sanctions. Reuters source reports have quoted traders in the U.S. as saying that “people are not touching Russian barrels”, citing concerns that they did not want to be seen as “buying Russian products and funding a war against the Ukrainian people.”
• Elsewhere, the IEA announced a release of 60mn bbls of crude from strategic stockpiles on Tuesday, but this has done little to curb rises in oil prices, keeping in mind that global oil consumption is estimated to be over 90mn bpd.
• The latest round of U.S. API inventory reports crossed on Tuesday, with reports pointing to a surprise drawdown in U.S. crude stocks, a wider than expected drawdown in gasoline stocks, as well as a drawdown in stocks at the Cushing hub. Meanwhile, there was a modest, surprise build in gasoline stocks..
• Looking ahead, EIA data is due later on Wednesday (1530GMT).
• OPEC+ meets later today as well, with the group set to stick to its pre-prescribed cumulative output increase of 400K bpd in April (keeping in mind that some members continue to face well-documented issues in hitting production quotas).