Crude oil futures prices fell Mar. 17 on the New York and London markets as analysts suggested sanctions against Russia and Ukraine by the US and European Union were unlikely to immediately constrain world oil or natural gas supplies.
US and EU officials rejected the results of the Mar. 16 Crimean referendum to break away from Ukraine. Sanctions were enacted Mar. 17 in response to Russia’s military intervention in Crimea.
US sanctions prohibit US citizens from doing business with seven Russian officials and four Ukrainians. The EU announced asset freezes and travel bans on 13 Russians and 8 leaders from Ukraine's Crimean region.
Ole Hansen, Saxo Bank director of commodity strategy, said in a Mar. 17 research note that commodities generally weakened Mar. 17 after removal of what he called “the safe-haven premium that was building ahead of the election in Crimea.”
He said initial Western sanctions were “unlikely to trigger a Russian disruption to oil and gas flows.”
EU and US officials have suggested stricter sanctions could be imposed soon unless Russia and Ukraine demonstrate progress in resolving tensions.
Barclays analysts noted that a continuation of tensions still could hinder Russian energy exports. “While there has been no cut-off of Russian energy supplies through the Ukraine pipeline network to date, such a course of action cannot be ruled out if the crisis escalates,” Barclays analysts wrote, adding, “Another clear concern is that the crisis will jeopardize much-needed, long-term Western investment in the Russian energy sector.”
Meanwhile, the US Federal Reserve Open Markets Committee met Mar. 18. Analysts suggested the Fed might continue tapering its bond-buying economic stimulus program.
The April natural gas contract was up 11.1¢ to a rounded $4.54/MMbtu. On the US spot market, the gas price at Henry Hub was $4.58/MMbtu, up 22¢.
Heating oil for April delivery dropped 5.23¢ to a rounded $2.89/gal. Reformulated gasoline stock for oxygenate blending for April delivery declined 7.86¢ to a rounded $2.88/gal.
In London, the May ICE contract for Brent crude delivery fell $1.97, closing at $106.24/bbl, which was the lowest settlement since Feb. 4 for the front-month Brent price. The June contract fell $1.94 to close at $105.99/bbl. The ICE gas oil contract for April dropped $12.25 to $889.50/tonne.
The Organization of Petroleum Exporting Countries reported its basket of 12 benchmark crudes edged up slightly to $103.85/bbl on Mar. 17, gaining 2¢.
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