Oil tumbles as Europe defers banning Russian crude imports | Oil and Gas News

Markets sold off after the EU and US announced an agreement to cut reliance on Russian natural gas.

Oil fell as the European Union shied away from banning Russian crude imports, while Kazakhstan said disruption at a key export terminal is set to ease.

Futures in New York fell as much as 3.3%, trading in a $4 range on Friday. Markets sold off after the EU and U.S. announced an agreement to cut reliance on Russian natural gas, though several nations remain uncomfortable with any potential oil embargo on a major supplier. Meanwhile, crude oil loading from Kazakhstan’s Caspian Pipeline Consortium link has partially resumed.

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

“The oil market is exhausted,” said Ed Moya, senior market analyst at Oanda. “Everyone wants to get a better handle on what’s going to be the next step,” and “traders don’t want to over-commit until we see further geopolitical developments.”

The global oil market has been thrown into turmoil by Russia’s invasion of Ukraine, with the U.S. and Europe imposing sanctions on Moscow and crude buyers shunning the country’s cargoes. Trafigura Group forecast this week that crude prices are set to keep rising, potentially hitting $150 a barrel. Initial margins, the collateral that clearing houses require investors to put up to manage risks, have also surged, adding to trading costs and compounding the retreat by traders.

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 a ban of Russian oil and gas.

Prices:

• West Texas Intermediate for May delivery lost $1.33 to $111.01 at 10:47 a.m. in New York
• Brent for May settlement fell $1.67 to $117.36 a barrel

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 the moorings 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 $3.25 a barrel on Friday, up from 41 cents at the start of the year.

Related coverage and commentary:

• None of Germany’s proposed approaches to weaning itself off Russian oil this year look like they will be easy — at least without decreasing demand at the same time.
• There’s growing anxiety that Europe might run out of diesel following Russia’s invasion of Ukraine.
• The continent only has about 40 days supply of the crucial fuel in its stockpiles.Naphtha cracks jumped sharply after Platts clarified that it won’t consider discounted supplies from Russia when publishing its benchmark prices.