Three buyers of Russian crude oil were unable to open letters of credit with Western banks to cover their purchases, four Reuters business sources said on Thursday following Russia’s attack on Ukraine.
Banks are understandably hesitant to extend credit for purchases of Russian crude, given the current situation between Russia, Ukraine and the West.
A letter of credit is a letter issued by banks that guarantees that payment from a buyer to a seller will be received on time and for the correct amount. However, banks may find it difficult to accept such a definitive guarantee after Russia arrived in Ukrainian cities by land and sea early Thursday morning in what Russian President Vladimir Putin called an “operation special military”.
Missile fire was reported near the city of Kyv, and Russia landed in port cities such as Odessa. As a result, crude oil prices soared, with Brent crude hitting over $104 a barrel.
So who is trying to buy Russian crude oil? Buyers of Russian oil include major oil companies such as BP, Chevron, Exxon, Shell and TotalEnergies, to name a few. Trading houses, including Trafigura and Vitol, also buy Russian crude oil.
Vitol also trades with Russian mining companies, according to Vitol’s website.
Reuters’ unnamed sources did not reveal which banks refused to offer letters of credit for Russian crude oil, but any halt in the flow of Russian crude oil, which exports 7.5 million barrels of crude oil and crude oil products daily, including to the United States.
In November last year, 17.8 million barrels of Russian crude oil and petroleum products were shipped to the United States.
By Julianne Geiger for Oilprice.com
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