By Barani Krishnan
Investing.com - Additional EU sanctions on Russian energy — something oil bulls had been counting on day after day — isn’t coming yet as the West weighs between adding to the laundry list of actions already taken against Vladimir Putin, versus insulating itself against the global energy crisis.
That dithering cost oil prices again on Thursday as global benchmark Brent briefly joined U.S. crude in the sub-$100 a barrel territory, amid concerns about the onslaught of supply from national reserves scheduled to hit the market over the next six months.
Adding to the weight on oil was the worst coronavirus outbreak in Shanghai in two years that has forced a more-than-week long lockdown in China’s second largest city, sparking concerns about demand in the No. 2 oil consuming country.
“It doesn’t look like the EU will be sanctioning Russian oil anytime soon and that suggests oil will need a couple new catalysts to make a run back towards the recent highs,” said Ed Moya, analyst at online trading platform OANDA.
“The massive crude reserve release plan will provide short-term relief for oil prices but that is also happening as China’s COVID lockdowns are becoming a bigger hit on crude demand.”
Brent settled down 49 cents, or 0.5%, at $100.58 per barrel, after plumbing a session low of $98.50.
Last week, Brent fell 13% last week for its biggest weekly decline since April 2020 after finishing the first quarter up 39%.
New York-traded U.S. crude benchmark West Texas Intermediate, or WTI, settled down 20 cents, or 0.2%, at $96.03, after an intraday low at $93.86.
WTI settled below the key $100 support last week as it fell about 13%, just like Brent, for its worst week since April 2020. That came despite a 33% rally in the first quarter.
The European Union's top diplomat, Josep Borrell, told a NATO meeting that new EU measures against Russia, including a ban on coal, might be passed by Friday and the bloc would discuss an oil embargo next. However, the coal ban would take full effect from mid-August, a month later than initially planned, he said. That pause effectively buys the EU some breathing room amid the global energy crisis.
Crude prices fell for a third straight day after the Paris-based International Energy Agency, or IEA, said it will release 60 million barrels from the reserves of its members into the open market, adding to an earlier reserves release of 180 million barrels announced by the United States.
The combined 240 million barrels would be added to the market over a six-month period, resulting in a net inflow of 1.33 million barrels per day.
That would be more than triple the monthly increments of 400,000 barrels per day in output that global oil producers under the Saudi-controlled and Russian-steered OPEC+ alliance have been doing.
OPEC+ is keeping at least four million barrels of regular daily supply needed by consumers off the market to ensure that crude prices stay at above or around $100 per barrel, which has been the norm since the U.S. and EU sanctions imposed on Russia for its Feb. 24 invasion of Ukraine. Separately, the delivery of some 3.0 million barrels per day of Russian oil exports is being delayed by sanctions, with some being denied altogether.