LONDON: Oil slipped towards $125 a barrel in volatile trading on Wednesday as investors assessed the US ban of Russian oil imports and Russia announced a new ceasefire in Ukraine to let civilians flee.
Brent crude fell $2.27, or 1.8%, to $125.71 a barrel after earlier rising above $131. US West Texas Intermediate (WTI) fell $3.19, or 2.6%, to $120.51.
Oil also fell as the head of the International Energy Agency (IEA) described the agency’s decision last week to release 60 million barrels of oil reserves to compensate for supply disruptions following Russia’s invasion as “an initial response” and that more could be released if needed.
Oil has surged since Russia, the world’s second-largest crude exporter, launched what it called a “special operation” in Ukraine. Brent hit $139 on Monday, its highest since 2008.
On Wednesday, Russia announced a new ceasefire in Ukraine to let civilians flee besieged cities, after days of mostly failed promises that have left hundreds of thousands of Ukrainians trapped without access to medicine or fresh water.
In addition to the US decision, Britain also said it would phase Russian imports out and Shell said it would stop buying Russian crude. JP Morgan estimated around 70% of Russian seaborne oil was struggling to find buyers.
One potential source of extra oil supply is Iran, which has been in talks with Western powers for months on restoring a deal which lifted sanctions on Iran in return for curbs on its nuclear programme.
President Joe Biden announced a ban on US imports of Russian oil while Britain said it will phase them out by the end of the year. EU nations, which receive roughly 40 percent of their gas imports and one quarter of their oil from Russia, have opted to set a goal of cutting their Russian gas imports by two-thirds.
Meanwhile, Moscow warned earlier that in retaliation for sanctions imposed on it for the invasion, it could cut off natural gas supplies to Europe via the Nord Stream 1 pipeline.
Amid increasing pressure to isolate Moscow economically after the invasion of Ukraine, Coca-Cola, McDonald’s and Starbucks joined the growing number of major firms closing up shop in Russia.
Commodity prices also felt the effects of the growing isolation of Russia. The London Metal Exchange suspended trade in nickel after the base metal spiked to a record $101,365 a tonne as Russian supply concerns sparked sharp volatility.
Nickel is used to make stainless steel and batteries for electric vehicles, and prices have risen from around $20,000 a tonne in January, putting huge pressure on manufacturers. Gold rose as high as $2,069.25, a level unseen since August 2020.
The Ukraine crisis comes just as uncertainty was rising owing to surging prices caused by a spike in demand for oil, tight supplies and pandemic-induced supply chain snarls, among other things.
Central banks are beginning to raise interest rates to tamp down rising prices but markets remain fearful of stagflation, a vicious mixture of low economic growth and elevated inflation.
