Putin has destroyed Russia's most important oil market – and what's next for crude depends on him and Xi Jinping, energy expert Daniel Yergin says

Putin has destroyed Russia's most important oil market – and what's next for crude depends on him and Xi Jinping, energy expert Daniel Yergin says
Russia and China will likely carry on driving oil markets despite the EU's price cap, Dan Yergin said Friday.ALEXEI DRUZHININ/Getty Images
  • The EU ban on seaborne Russian oil came in Monday, alongside a price cap of $60 a barrel.
  • Putin has "destroyed his most important market for his oil" as Europe now wants no part of it, Daniel Yergin said.

Europe's tough sanctions on Russian oil kick in Monday — meaning Vladimir Putin has basically killed off Moscow's most important market for its crude, according to energy expert Daniel Yergin.

The European Union's ban on seaborne imports takes effect alongside a widely expected price cap of $60 a barrel for Russian oil, agreed in a last-minute deal with G7 nations on Saturday.

The moves underline how disastrous Russian President Putin's invasion of Ukraine in February has been for the country's energy exports, S&P Global vice chairman Yergin said.

"Vladimir Putin has basically destroyed his most important market for his oil and gas and his coal, which is Europe," Yergin told Yahoo Finance on Friday. "Basically, they don't want any part of it."

As well as blocking the majority of Russian crude imports into Europe, the ban will have an impact of nearly every cargo across the world. That's because it bars European providers of insurance and shipping services from handling vessels carrying Moscow-controlled supplies.


The sanctions are a bid to undermine Russia's ability to fund its war on Ukraine by curbing its crude export revenues, while the price cap aims to do this while maintaining a steady flow of fuel to western countries.

But Russia has said it won't do business with any country that abides by the EU sanctions, while members of the OPEC+ group of oil producers stuck to their output cuts at their meeting Sunday — both of which could drive prices.

"If [the price cap] actually works, I think it probably has a kind of gravitational pull on the price down," Yergin said.

"The OPEC nations don't like it because they say: 'Well, wait — if the industrial nations are setting the price on Russian oil, some day will they set the price on all of our oil?' So you have OPEC+ versus the G7."

"But if Russia does do what they threatened to do — to take a million or 2 million barrels a day out of the market — then you'll see a very different price reaction," he added.


Russia's Urals oil benchmark traded at $63.85 a barrel Monday. That's a significant discount to Brent crude, which is priced at $87.11 a barrel, and WTI crude, which changed hands for $81.44 a barrel at last check.

"Some people say this will all work smoothly. But it could be very turbulent and reflected in prices," Yergin said.

"And you're really predicting, among other things, what is Vladimir Putin going to do. He's already made, obviously, a lot of miscalculations. He can do it again.

"So in a way, if you think about what happens in the oil market in the next few weeks, a lot depends on the decision-making by one Vladimir Putin and one Xi Jinping."

Commodities traders are watching for further signs Beijing will relax its zero-COVID curbs, which many analysts believe mean an economic reopening that would boost Chinese oil demand.

"The big hit in the oil market is you're probably missing 700,000 barrels a day of Chinese oil demand," he said. "So if China does begin to open up, we'll see the oil price respond on the upside."

Read more: EU sanctions on Russian oil take effect on Monday - here's what to expect and why the price cap may not yield any real results