Chaos ruled the global oil market with top buyers of Russian oil struggling to secure guarantees at Western banks or find ships to take the crude from Russia, one of the world’s largest producers.

As per four trading sources, at least three major buyers of Russian oil were unable to open letters of credit from Western banks to cover purchases citing market uncertainty after the Russian invasion.

Russia produces every 10th barrel in the world; oil prices have jumped above $105 per barrel on Thursday, their highest since 2014.

In the Black Sea, a Turkish-owned ship was hit by a bomb off the coast of Ukraine’s port city Odessa, prompting shipping companies to avoid calling at Black Sea ports.

Greece has recommended all Greek ships to immediately leave Ukraine and Russian territorial waters in the Black Sea, said ship brokers and a senior Greek maritime ministry official.

“Banks are not willing to open LCs for the moment so it is a bit of a standoff,” said one of the sources on the condition of anonymity.

Top Russian oil buyers include Western oil majors such as BP and Shell, ENI, TotalEnergies, Equinor, Chevron, Exxon Mobil, Vitol, Glencore, Trafigura, Gunvor and Mercuria.

Sources did not reveals the names of the banks which refused to issue LCs.

While many countries have called for banning Russia from the SWIFT financial transaction system, it could have major implications for the western economy since it will disrupt exports of much-needed commodities midst rising inflation.

Washington has tried to dampen worries about sanctions on Russian banks and have increased energy transactions.

In fact, U.S. President Joe Biden told reporters at the White House, “Our sanctions package, we specifically designed to allow energy payments to continue.”

Russia exports around 4-5 million barrels per day (bpd) of crude and another 2-3 million bpd of refined products. China, the European Union, South Korea, India and Japan are its main buyers.

Most top Western banks are active in financing oil and commodities and issue LCs.

So far it is unclear to what extent the lack of letters of credit could disrupt Russian exports, with some traders saying it would take at least several days for companies and banks to figure out the new legal environment.

Three trading firms, Glencore, Trafigura and Litasco, struggled to place 100,000-tonne Urals crude cargoes loading in mid-March from Russia’s Baltic ports as prices dropped to their lowest level on record in the post-Soviet period, said traders.

Shipping rates for loading at Russian ports and discharge in northern Europe have tripled in one day to World Scale 300, or about $2.3 million per ship, from World Scale 100, as many ship owners now refuse to call at Russian ports.

“Some 90% of ship owners are telling us they will sit and assess the situation,” said a ship broker. “We’ve had one owner saying they will not work with Russian counterparts.”

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