Russia Facing Difficulty In Turkish Straits? Shipping Disruptions May Be Moving Global Oil Market

Oil is in the green on Thursday amid several factors, including unconfirmed reports that Turkey may be blocking Russian ships from entering the Bosphorus Strait, according to Benzinga Pro.

The United States Oil Fund LP (ETF) USO is up 3 percent, with several oil names trending upward. Transocean LTD RIG is recovering from a one-month low below $14 per share, while ENSCO PLC ESV, Statoil ASA(ADR) STO, Petroleo Brasileiro SA Petrobras (ADR) PBR and several other sector names are trending upward. Brent Crude futures have risen nearly 5 percent.

What Sources Are Saying

A source involved in global oil freight contracts revealed tensions in the Turkish Straits are high and there exists a very real probability that Turkey may be blocking Russian ships at the Bosphorus Strait, Benzinga Pro reported.

Chatter from other traders theorizes that Turkey may be strategically placing vessels in the path of Russian vessels in the Bosphorus. To comply with the Montreux Convention of 1936, it's thought Turkey could make Russian ship movement activity as difficult as possible without an outright blockade.

Montreux laws prevent Turkey from closing the Straits without declaring war, something former Russian Defense official Yevgeny Buzhinsky recently said he didn't think would happen.

What Buzhinsky told reporters last month:

"I don’t think that Turkey, even in these tense conditions with Russia, will want to violate the Montreux Convention, because if Turkey begins violating it, it will be very difficult to restore it. We can ask the question: can Turkey close the straits to Russia? Theoretically, yes. But to do so, it must declare war on Russia, since the Montreux Convention states that only in the event of a war can Turkey close the straits."

Why Does This Matter?

The strait, along with the Dardanelles, form the basis of the Turkish Straits, connecting the Black Sea with the Mediterranean and Aegean Seas.

The Straits are an important waterway for Russian oil exports to Europe and the United States. It's estimated that 4 percent of worldwide transit -- and a much larger portion of Russian activity -- flows through the Straits.

Shipping activity in the Bosphorus is significant enough to warrant fears of a negative supply shock in the event of any disruptions. Amid a heavily watched OPEC meeting this week, the developing situation bears close monitoring.

Garrett Cook and Jake Mann contributed to this report.