Oil prices were down on Wednesday, even after fears of a potential supply shock as the United States banned Russian oil imports, and amid signs that some buyers are already shunning them.
U.S. West Texas Intermediate (WTI) crude futures dropped $6.31, or 5.06%, at $118.53 a barrel, after surging 3.6% on Tuesday.
Brent crude futures was down $6.95, or 5.38%, at $122.20 a barrel, after jumping 3.9% the previous day.U.S. President Joe Biden on Tuesday imposed an immediate ban on Russian oil and other energy imports and Britain said it would phase out Russian oil imports through the end of 2022 in response to Russia’s invasion Ukraine.
Shell said on Tuesday it would stop buying Russian crude and phase out its involvement in all Russian hydrocarbons, becoming one of the first major Western oil companies to abandon Russia entirely.
Meanwhile, Goldman Sachs estimated that more than half of Russian oil exported from ports remained unsold, while JP Morgan estimated around 70% of Russian seaborne oil was struggling to find buyers.
Oil prices have surged more than 30% since Russia, the world’s second-largest crude exporter, launched what it called a “special operation” in Ukraine. Fears of further disruptions to oil supply amid escalating sanctions on Moscow has boosted buying, analysts said.
“The upward pressure on oil prices continues to strengthen as the market digests the implications of the U.S. import ban on Russian barrels and awaits details of Moscow’s export embargoes,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
Oil prices jumped on Monday to their highest levels since July 2008, with Brent hitting $139.13 a barrel and WTI $130.50.
“On top of the U.S. and Britain’s announcement effects, fears of further disruptions of supply from Russia due to intensifying sanctions on Moscow prompted fresh buying,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
“But Monday’s highs will likely become a ceiling for the short term as speculative buying is expected to slow down soon and countries in the northern hemisphere are headed to spring when fuel demand drops,” he said.
U.S. crude stocks rose by 2.8 million barrels for the week ended March 4, against analysts’ forecast of a drop, but gasoline and distillate stocks fell, according to market sources citing American Petroleum Institute figures on Tuesday.