Oil fell 5% on speculation that the US-Russian oil embargo will not add to the supply shock

LONDON (Reuters) – Oil fell more than 5% to about $121 a barrel on Wednesday as some investors argued that a U.S. embargo on Russian oil might not exacerbate the supply shock and the head of the International Energy Agency said the agency was not doing enough. It can increase the utilization of oil stocks.

On Tuesday, US President Joe Biden imposed an immediate embargo on Russian oil. Read more Traders said talk that Ukraine is no longer seeking NATO membership after some news reports this week on the issue weighed on prices. Read more

“Maybe this is playing its part,” Tamas Varga of BVM told the oil broker in the case of Ukraine’s NATO membership.

“The realization that the US import ban may not make the current supply shock worse than it was may also have led to this bout of profit-taking,” he added.

Brent crude fell $6.96, or 5.4 percent, to $121.02 a barrel at 1430 GMT, after falling earlier to $120.04. US West Texas Intermediate (WTI) fell $6.56, or 5.3%, to $117.14.

The United States imported more than 20.4 million barrels of crude and refined products per month from Russia in 2021, about 8% of U.S. imports of liquid fuels, according to the Energy Information Administration. Read more

“In theory, the United States could compensate for the outages in Russia with its own production,” Commerzbank’s Karsten Fritsch wrote in a report.

Oil also fell as the head of the International Energy Agency described the agency’s decision last week to release 60 million barrels of oil from strategic reserves as an “initial response” and said more could be released if needed. Read more

Crude oil has risen since Russia, the world’s second-largest crude oil exporter, launched what it called a “special operation” in Ukraine. Brent crude hit $139 on Monday, its highest since 2008.

Russia announced, on Wednesday, a new ceasefire in Ukraine to allow civilians to flee from besieged cities. Read more

In addition to the Russian oil embargo, Britain said on Tuesday it would phase out Russian imports and Shell said it would stop buying Russian crude. JP Morgan estimated that about 70% of Russian seaborne oil was struggling to find buyers. Read more

One potential source of additional oil supplies is Iran, which has been in talks with Western powers for months about resuming the 2015 nuclear deal, which then-US President Donald Trump abandoned in 2018. Iran’s chief negotiator at the Vienna talks has returned to the Austrian capital. Wednesday. Read more

Amid fears of a supply shortage, there are some indications that the market is not experiencing a shortage of crude oil yet.

US crude stocks rose by 2.8 million barrels, according to market sources, citing figures from the American Petroleum Institute, an industry group, on Tuesday. Official US inventory numbers are due at 1530 GMT.

Additional reporting by Yuka Obayashi and Mohi Narayan; Editing by Bernadette Baum, Mark Potter and Nick McPhee

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