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Sanctions on Russian crude oil have ‘failed completely,’ oil analyst says

The G-7, the EU and Australia implemented on Dec. 5 a cap on Russian oil prices.

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Sanctions imposed on Russian crude oil have so far “failed completely” and new price caps could prove immaterial as well, analysts told CNBC.

The European Union is planning to ban imports of refined petroleum products from Russia, including diesel and jet fuel, from Sunday.

The 27-member bloc has already banned the purchase and import of sea-borne Russian crude oil since December.

In addition, the bloc — along with its allies in the Group of 7 and Australia — has set a price cap on Russian seaborne crude oil, which bars the use of Western-supplied maritime insurance, finance and other services unless they are sold below $60 per barrel.

They are part of global efforts to curb Moscow’s ability to raise funds for its war in Ukraine.

The price cap “was invented by bureaucrats with finance degrees. None of them really understand oil markets,” Paul Sankey, president and lead analyst at Sankey Research, told CNBC’s “Street Signs Asia” on Thursday.

“Its been a total bomb, it has failed completely.”

Oil market looks like it's in 'pretty good shape,' analyst says

Sankey underlined it has been tough for oil markets because Russian oil supply hasn’t really been interrupted and “they’ve sustained exports at high levels.”

“I heard it from a great source that the Saudis have been asking around as to how come Russian oil is still flowing,” he said.

“That brings the question of what will happen with the sanctions coming up on products, because it just doesn’t seem to work.”

Ahead of the proposed price caps on Russia’s refined products on Feb. 5, member states had yet to agree on a price cap, according to Reuters. It is hoped that a deal can be reached by Friday.

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Sankey further noted “oil friendships are greasy” and there’s a lot of different ways to move Russian oil around the world bypassing the price caps.

“One of the things people have highlighted is look at Malaysian oil. Its crude oil exports to China is at 1.5 million barrels a day,” said Sankey. “Malaysia only produces 400,000 barrels a day. I don’t think that’s Malaysian crude. So there’s plenty of stuff moving around outside these … theoretical caps. “

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