Oil rose to its highest since 2014 on Tuesday after Moscow ordered troops into two breakaway regions in eastern Ukraine, adding to supply concerns that are pushing prices towards $100 a barrel.
Moscow’s move drew international condemnation and U.S. officials said Washington in coordination with allies is planning to announce new sanctions on Russia.
U.S. President Joe Biden has issued an executive order to halt U.S. business activity in the breakaway regions and ban import of all goods from those areas.
But a Biden administration official said Russia’s military action did not as yet constitute an invasion that would trigger a broader sanctions package.
U.S. West Texas Intermediate (WTI) crude futures was down $1.35, or 1.40%, to $92.49 a barrel versus Friday’s settlement.
Commonwealth Bank analyst Vivek Dhar said it was unlikely U.S. and European governments would impose oil or gas sanctions on Russia if it invaded Ukraine further, as that would inflict pain on themselves.
However, Russia itself could hold back oil and gas supplies if it sought to retaliate against any other sanctions imposed by the West, Dhar added.
Ukrainian President Volodymyr Zelenskiy accused Russia of wrecking peace talks and ruled out territorial concessions.
Analysts say the big question hanging over the oil market is whether Russian energy exports would actually be disrupted if Moscow went ahead with a fullscale invasion of Ukraine and western governments imposed sanctions against Russian financial institutions.
“Short of the U.S. and Europe throwing the Ukraine under the political bus and appeasing Putin in totality, it seems inevitable that Brent crude will test $100 a barrel sooner rather than later,” OANDA analyst Jeffrey Halley said in a note to clients.