By Adedapo Adesanya
Crude oil prices dropped more than 2 per cent on Thursday as the European Union (EU) could not agree on a plan to boycott Russian oil.
This affected the price of Brent crude at the international market as it went down by 2.93 per cent or $3.56 to sell at $118.00 per barrel, while the United States West Texas Intermediate (WTI) depressed by 3.07 or $3.53 to trade at $111.40 per barrel.
European Union leaders are set to agree at a two-day summit which started on Thursday to jointly buy natural gas as they seek to cut reliance on Russian fuels, with some saying they would not comply with Moscow’s demand to buy oil and gas using Roubles, the official Russian currency.
Leaders will discuss that plan on Friday, when the EU is also expected to announce an agreement with US President Joe Biden, who will attend the summit, on extra US liquefied natural gas (LNG) supplies for the next two winters.
Russia supplies 40 per cent of the EU’s collective gas needs – most of which arrives via pipelines – plus 27 per cent of oil imports and 46 per cent of coal imports.
Countries in Europe, however, remain divided on whether to sanction Russian oil and gas directly, a move already taken by the United States and this dampened the market.
Latvia and Poland are among countries seeking to halt the hundreds of millions of euros per day the continent pays Russia for fossil fuels while Germany, which receives close to 20 per cent of Russia’s gas exports, and Hungary are among those opposed, citing the economic damage an oil embargo would unleash.
Also affecting the market is China, which is fighting the worst COVID-19 outbreak since 2020, and analysts are considering a revision of their oil demand forecasts as refineries reduce run rates and lockdowns hurt consumption.
Due to the outbreak and the lockdowns following it in the world’s largest importer, some independent refiners were forced to resell oil cargos they had ordered.
The lockdowns have reduced traffic in some cities as well as air travel, prompting refiners to reduce processing rates.
Also, reports that exports from Kazakhstan’s Caspian Pipeline Consortium (CPC) terminal could partially resume also dampened the mood of the market.
Also weighing on crude prices, the American Dollar strengthened for the fourth time in five sessions. A stronger greenback makes oil more expensive for holders of other currencies.
