Oil Drops as Europe Holds Off on Ban of Russian Crude Imports

Mar 25, 2022

(Bloomberg)

Oil fell as the European Union held off on banning Russia crude imports, while Kazakhstan said disruption at a key export terminal is set to ease.

Brent futures slid 0.7% after fluctuating earlier Friday. The EU and U.S. announced an agreement to cut reliance on Russian fuel, though several nations remain uncomfortable with any potential oil embargo on a major supplier. Meanwhile, Kazakhstan expects one of the moorings at the CPC terminal on Russia’s Black Sea coast to resume work on Friday, allowing oil tankers to be loaded again.

“The market has taken some comfort in the fact that it is looking unlikely that we see an EU ban” on oil, said Warren Patterson, head of commodities strategy at ING Groep NV. Yet “there will still be plenty of noise about further sanctions or oil bans in the days and weeks ahead” and the market will remain volatile.

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Oil is still up this week and has rallied over the past four months, hitting the highest since 2008 in early March as Russia’s war in Ukraine roiled already-tight commodity markets. In response, the U.S. and U.K. have moved to bar Russian oil, and many Western energy companies are also choosing to shun the nation’s crude. Buyers in Asia, including China and India, appear to be soaking up some of those barrels.

Oil is set to gain this week for the first time in three weeks

EU industrial powerhouse Germany has said it plans to quickly wean itself off Russian fossil fuels, though warned an immediate embargo is not possible because of the damage it would cause to Europe’s biggest economy. Austria also said it won’t agree to an embargo of Russian oil and gas.

Prices:
Brent for May settlement fell 0.7% to $118.17 a barrel on the ICE Futures Europe exchange at 10:13 a.m. in London Prices are up more than 9% this week West Texas Intermediate for May delivery lost 1% to $111.25 on the New York Mercantile Exchange

The CPC export terminal halted cargo loadings earlier this week after moorings sustained significant damage in bad weather. Kazakh Energy Minister Bolat Akchulakov said Friday that one of them will restart operations shortly, while two others are expected to resume in three weeks.

Oil markets remain backwardated, a bullish pattern marked by higher prices for near-term barrels than those further out. Brent’s prompt spread — the difference between its two nearest contracts — was $3.57 a barrel on Friday, up from 41 cents at the start of the year.