Sanctions risks come to the fore

Commentary Summary:

– Market still needs to assess the potential damage to Russian supply but substantial disruption already starting to be priced.

– Chinese and even Indian players may end up boosting the legitimate physical crude market hugely. However, their run rates are also partly at risk, particularly in Shandong.

– EFS spike was paper Brent-driven but needs to reverse to allow Western arb into the East.

– With US stocks tight, a wide WTI/Brent is likely unsustainable, though this will depend on TD25 & North Sea FOBs over the coming days.

– Expect boosted DPP rates (another one for the EFS to have to overcome).

Brent timespreads have now double in a few days, shifting higher alongside flat price. New sanctions on Russian tankers are expected to impact crude supply to China and India, though key players in these countries are still assessing the legal situation and possible workarounds.