Russia Offers Record Discount For Its Oil As Buyers Pause, Struggle To Finance

Three buyers of Russian crude oil have been unable to open letters of credit from Western banks to cover their purchases, four Reuters trading sources said on Thursday following the Russian attack on Ukraine.

As Julianne Geiger writes at OilPrice.com, 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 a buyer’s payment to a seller will be received on time and for the correct amount. However, banks may find such a definitive guarantee hard to stand by after Russia arrived in Ukraine cities by land and sea early on Thursday morning in what Russian President Vladimir Putin referred to as a “special military operation.”

Missile fire was reported near the city of Kiyv, and Russia has landed in port cities such as Odesa. Crude oil prices have shot up as a result, with Brent crude spiking to more than $104 per barrel.

So who is trying to purchase Russian crude oil? Buyers of Russian oil include Big Oil companies such as BP, Chevron, Exxon, Shell, and TotalEnergies, to name just a few. Trading houses, including Trafigura and Vitol, also purchase Russian crude oil. – READ MORE