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At least three major buyers of Russian oil have been unable to open letters of credit from Western banks to cover purchases on Thursday, four trading sources said citing market uncertainty after Russia invaded Ukraine.
“Banks are not willing to open LC’s for the moment so it is a bit of a standoff,” one of the sources said. He asked not to be named due to the sensitivity of the issue.
Letters of credit from the bank of the buyer are standard practice in commodities trading and guarantee the seller’s bank that payment will be made in full and on time.
Top Russian oil buyers include Western oil majors such as BP and Shell, ENI, TotalEnergies, Equinor, Chevron and Exxon Mobil and trading houses such as Vitol, Glencore, Trafigura, Gunvor and Mercuria.
The sources did not name which banks refused to issue LCs.
Almost all top Western banks are active in commodities and issue LCs.
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