Oil Market Falls as Russian Energy Ban Splits European

By Adedapo Adesanya

The oil market retreated on Tuesday as foreign ministers in the European Union disagreed over the proposed plan to join the United States in banning Russian energy.

Brent crude futures, the international benchmark, fell 0.23 per cent or 27 cents to $115.40 while the US West Texas Intermediate (WTI) crude fell 0.73 per cent or 82 cents to $111.30 per barrel.

Prices had jumped 7 per cent at the previous session as it was reported that the European Union was considering placing an embargo on Russian oil but this turned sour on Tuesday as some countries said the bloc was too dependent on Russia’s fossil fuels to withstand such a step.

Poland and the Baltic nations (Estonia, Latvia and Lithuania) are among the most vocal supporters of restricting the purchases of Russian oil, other nations — notably Germany and Hungary — are concerned about what this step would mean for prices.

Following the other sanctions against Russia over its invasion of Ukraine, as well as buyers’ self-sanctioning, the global markets could lose around 3 million barrels per day of Russian crude and products supply.

The US, which imports around 500,000 barrels per day of Russian crude and products, can afford to ban imports from Russia without severe consequences on its industry and economy, compared to Europe.

The United Kingdom, which has left the bloc, had also announced its own restrictions on buying Russian oil imports.

Unlike the US and the UK, it is a tough choice for the 27-nation EU, which relies on Russia for 40 per cent of its gas – a byproduct of crude oil.

Oil was also pressured by a stronger US Dollar, which gained a day after comments from US Federal Reserve Chair Mr Jerome Powell flagged a more aggressive tightening of monetary policy.

A strong Dollar makes crude more expensive for other currency holders and tends to weigh on risk appetite.

This development outweighed support from threats to supply as Yemen’s Iran-aligned Houthi group attacked Saudi energy and water desalination facilities.

On Monday, Saudi Arabia said it would not bear responsibility for any global supply shortages after the attacks by the Houthis, signalling growing Saudi frustration with the way the Joe Biden led administration is handling Yemen and Iran.

The oil market will watch the latest round of US inventory data with analysts expecting no change in crude oil stocks.