By Adedapo Adesanya
Concerns over potential global supply disruptions from sanctions on one of the major crude exporters, Russia, eased, causing the price of oil to wane by one per cent on Friday.
The Brent crude futures depreciated by 1.16 per cent or $1.15 to $97.93, while the US West Texas Intermediate (WTI) crude fell by 1.31 per cent or $1.22 $91.59 per barrel.
Russia’s invasion of Ukraine on Thursday shocked the world and sent oil prices soaring above $100 for the first time in over seven years.
However, the relatively warm reaction of Western leaders brought oil prices back down on Friday as it becomes clear that Russia’s energy industry is unlikely to be sanctioned.
The market was bracing itself for a shocker that Russia’s invasion of Ukraine would have triggered a much stronger response from the international community. Instead, there seems to be hesitancy between European leaders.
Analysts believe that this is happening because Russian oil and gas flows are too important to international markets for Western powers to target them with sanctions.
The attack on Ukraine has become the biggest geopolitical issue in Europe since World War II as thousands of people have been forced to flee their homes to other countries.
On Thursday, US President Joe Biden responded to the invasion with a wave of sanctions that impede Russia’s ability to do business in major currencies along with sanctions against banks and state-owned enterprises.
Britain, Japan, Canada, Australia and the European Union also unveiled sanctions, including a move by Germany to halt certification of an $11 billion Russian gas pipeline.
However, these will not impact the oil and gas flow as the country is the world’s second-largest crude producer and a major natural gas provider to Europe.
Russia exports roughly 50 per cent of its crude oil to the West and a slowdown in the purchase may make an already tight market become tighter.
Amid this, the US is still working with other countries on a combined release of additional oil from their strategic crude reserves.
On the supply side, the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ is likely to stick to a planned output rise of 400,000 barrels a day in April despite crude topping $100 a barrel.
The group will meet on Wednesday, March 2 to make the decision.
