1. What is causing the disturbance?

With the financial sanctions imposed on Russia by the US, UK and EU, market participants, including tanker owners, are reluctant to trade with Russian counterparties, even though the market for energy itself was largely exempt. It is a fatal blow for Russian oil, a pillar of the country’s economy, with nearly two-thirds of its crude sales transported by ship. Some marketers are also aware of negative publicity. Shell Plc’s purchase of Russia’s flagship Urals crude on March 4 was criticized by Ukrainian Foreign Minister Dmytro Kuleba on Twitter as smelling of “Ukrainian blood”. Four days later, the company said the decision was “wrong” and that it would not make any new purchases of Russian oil and gas. BP Plc honored this commitment and was joined by Paris-based TotalEnergies SE on March 22.

2. What is the impact on prices?

Global benchmark Brent crude surged above $100 a barrel in the days following the Feb. 24 invasion, swinging wildly in the weeks that followed but remaining high. The oil market has gone into a frenzy and has embarked on one of the biggest so-called run-offs on record – where contracts for more immediate supply are far more expensive than those for later deliveries. The prices of other fuels have seen even bigger jumps, notably the cost in Europe of natural gas and diesel, faced with the prospect of shortages.

3. How much oil is avoided?

It’s hard to say, leaving energy traders to watch pipeline shipments and throughput with heightened interest. On March 16, the International Energy Agency, which represents major industrialized countries, estimated that Russia’s oil production could fall by a quarter in April as buyers turn away from the country’s exports, inflicting the biggest supply shock to the market in decades. Although many buyers, especially former European buyers, have announced that they will not trade Russian crude, Asian buyers may step in to take barrels at discounted rates. Chinese refiners are quietly buying cheap Russian oil, traders say, and Indian processors have also picked up some of the volumes. Russia exports about 5 million barrels of crude per day, equivalent to about 5% of global consumption, as well as nearly 3 million barrels per day of refined products – key fuels such as diesel, fuel oil and a petrochemical feedstock known as naphtha.

4. What are the US, UK and EU doing?

On March 8, President Joe Biden declared that the United States would ban imports of Russian fossil fuels, including oil. Russian crude accounted for about 3% of US imports last year. The UK ban, announced the same day, will be phased in over the rest of the year and will apply to all Russian oil imports as well as refined products; the UK depends on Russia for around a third of its diesel imports. The British measure will not apply to natural gas. For the EU, the stakes are even higher and the bloc was divided over support for an embargo on Russian crude. Germany, Poland and Hungary are among the most exposed to any loss of Russian oil, as they have refineries that rely on pipeline deliveries from the nation.

5. What could plug the hole?

The IEA announced on March 1 its intention to deploy 60 million barrels from stockpiles around the world. Half of that amount will come from the U.S. Strategic Petroleum Reserve, with the rest coming from members in Europe and Asia, according to details released by the IEA. The planned release is equivalent to around 17 days of deliveries of frozen Russian crude and additional volumes could be made available. IEA member countries hold nearly 1.5 billion barrels of government-controlled oil stocks.

6. Could more oil come from other sources?

There are several possible sources of additional supply. It is hoped that Iran could pump oil into the market, should world powers succeed in their efforts to secure a new deal with the country limiting its nuclear program in return for the lifting of US sanctions that have limited its oil exports. There is also spare capacity in the United States, where producers have limited their growth in recent years under pressure from investors. The United States is also in talks with Venezuela, signaling a possible major shift in the US approach to socialist government. So far, the Organization of the Petroleum Exporting Countries and its allies have refused to ramp up production. At a meeting in early March, the group stuck to the modest production increase of 400,000 barrels per day it had previously planned for April.

7. What are the implications for the Russian energy industry?

The Biden administration has said it is seeking to downgrade Russia’s status as a top oil and natural gas producer by restricting exports of energy-related technologies. Some of the world’s biggest oil companies, including Exxon Mobil Corp., BP and Shell, have pledged to leave Russia, reducing the capital available for investment. TotalEnergies said it would not abandon operations in Russia for the time being, but would no longer provide capital for new projects there. It owns about a fifth of gas producer Novatek PJSC as well as a significant stake in the Yamal LNG project, Russia’s largest producer of liquefied natural gas.

8. What is happening with Russian gas exports?

While oil shipped from one country can to some extent be replaced by barrels from elsewhere, imports of natural gas are more difficult to replace. This is because there is a huge network of infrastructure that depends on pipeline supply from Russia. The alternative, cargoes that are cooled in liquid and delivered by ship, cannot come close to clearing. As a result, Russian gas is still piped to Europe, which depends on Russian energy giant Gazprom PJSC for about a third of all gas consumed. On March 23, gas futures jumped again after Russian President Vladimir Putin demanded that “unfriendly” countries pay for gas in roubles, rekindling fears over the stability of Russian supplies.

9. Does Europe have longer term options?

Potentially, yes. The European Commission, the executive arm of the European Union, is moving to fast-track measures to try to wean the bloc off Russian gas, though some would take years to implement. In a report, the IEA said the EU could, without compromising its climate ambitions, cut Russian gas imports by a third by sourcing more fuel from other countries, accelerating energy deployment renewables and increasing efficiency. Proposed measures include increasing nuclear-generated electricity and replacing gas boilers with electric heat pumps.