Oil slides near 2 as EU fails to boycott Russian crude

Crude prices slid nearly 2 per cent on Thursday after the European Union (EU) did not agree on a plan to boycott Russian oil and as the United States and its allies discussed a possible further coordinated release of oil from storage.

European Union leaders were set to agree at a two-day summit to jointly buy natural gas to cut reliance on Russian fuels. Some said they would not comply with Moscow’s demand to buy oil and gas using roubles.

Russia’s invasion of Ukraine on Feb. 24 has prompted the EU to pledge to slash reliance on Russian fossil fuels by hiking imports from other countries and quickly expanding renewable energy.

Brent futures fell $1.98, or 1.7 per cent, to $119.62 a barrel by 1:38 p.m. EDT (1738 GMT). US West Texas Intermediate (WTI) crude fell $2.00, or 1.7 per cent, to $112.93.

On Wednesday, both benchmarks closed at their highest since March 8.

The North Atlantic Treaty Organization (NATO) offered Kyiv new military assistance and assigned more troops to its eastern flank as London and Washington imposed fresh sanctions on Moscow. But EU leaders at the NATO meeting squabbled over cutting Russian energy links with Germany, the key opponent of an embargo.

International Energy Agency (IEA) Executive Director Fatih Birol said IEA countries were united in seeking to radically reduce Russian oil and gas imports.

Without an EU embargo of Russian oil, Commerzbank analyst Carsten Fritsch said sanctions were unlikely to have a major impact on the oil market.

With respect to releasing oil from US and allied emergency stockpiles, US Energy Secretary Jennifer Granholm said during a news conference at the IEA in Paris that “These are ongoing discussions and all those tools are certainly on the table.”

Oil prices fell more after ICE increased margins for May Brent crude futures by 19 per cent effective March 25, the third margin update this year.

Also weighing on crude prices, the dollar (.DXY) strengthened for the fourth time in five sessions.  A stronger dollar makes oil more expensive for holders of other currencies.

Trading was volatile for both crude benchmarks, which rose to two-week highs early in the session on lingering supply concerns including reports that crude exports from Kazakhstan’s Caspian Pipeline Consortium (CPC) terminal had halted following storm damage. But four sources familiar with the matter said oil exports via the CPC pipeline will partially resume on Thursday.

Crude prices drew some support from the drop in US crude in the Strategic Petroleum Reserve (SPR) to the lowest level since May 2002.

US crude at the Cushing storage hub in Oklahoma fell in the week to March 22, traders said, referring to a report from data provider Genscape. US government data has shown stockpiles there rising for the past two weeks.

Canada said it has capacity to increase oil and natural gas exports by up to 300,000 barrels per day (bpd) in 2022 to help improve global energy security.