(Bloomberg) – Oil ended a volatile session lower as a stronger U.S. dollar offset a potentially bullish impact from plans by the United States, European Union and Group of Seven countries to install a new series of sanctions against Russia.
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West Texas Intermediate fell 1.3% to close below $102 a barrel. The dollar rose after remarks from Federal Reserve Governor Lael Brainard that the country’s central bank would continue to methodically tighten policy and shrink its balance sheet at a rapid pace as early as May. A stronger dollar, which makes commodities priced in the currency less attractive, outweighed the US EU and G-7 countries’ plan to increase sanctions on Russian financial institutions and state-owned companies. Restrictions would also apply to all new investments in Russia.
The “strong US dollar likely contributed to the late-day selloff” in the oil market, said Ryan Fitzmaurice, commodities strategist at Rabobank.
In post-close trading, U.S. oil futures extended losses to briefly fall below $100 a barrel.
Oil rose to its highest level since 2008 in the first quarter as the Russian invasion disrupted supply to an already tight market facing soaring demand and dwindling inventories. The US and UK have already moved to ban Russian oil, and rising civilian casualties in Ukraine are putting pressure on governments to take further action against Russia.
Earlier, European Commission President Ursula Von Der Leyen said the trading bloc was working on new measures which will include sanctions on oil imports. Germany’s foreign minister said the bloc would leave Russian fossil fuels, starting with coal.
“The threat of European sanctions on Russian oil remains an upside risk to crude prices despite strong short-term opposition from some member states,” said Craig Erlam, senior market analyst at Oanda.
See also: EU to propose ban on Russian coal imports after atrocities
As the war in Ukraine enters its second month, Russia faces allegations that its troops massacred civilians in Bucha and other towns, a charge Moscow denies.
The possibility of further restrictions offsets the impact on the global crude market of a large release of US Strategic Petroleum Reserves (SPR) from May, in an effort to rein in prices. Other countries have said they will also make withdrawals. The move reshaped the oil futures curve, keeping a cap on prices nearby but raising them further into the future.
“A lot of those who were long on oil got out last week or so on the grounds that the SPR was just too much for the market to handle without real evidence of falling Russian crude exports,” said Scott Shelton, an analyst. energy at TP ICAP. Plc Group.
In a sign of tightening, Saudi Arabia raised selling prices for all regions. Saudi Aramco has raised its Arabian light crude for next month’s shipments to Asia to $9.35 a barrel above the benchmark it uses, a record differential.
Many Western companies do not buy Russian crude, although discounted exports are destined for buyers in Asia, including China and India. On Monday, commodity trader Trafigura Group offered to sell a Russian Ural-grade cargo at a record price, but there were no offers.
Meanwhile, the industry-funded American Petroleum Institute reported a 1.08 million barrel increase in U.S. crude inventories last week. For fuels, the group estimates that gasoline inventories have fallen by more than half a million barrels and that distillates have increased by almost 600,000 barrels.
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