Oil Falls as West Steps Up Pressure on Russia to End War

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange declined Friday, although all petroleum contracts finished a volatile week of trading with modest gains after the United States, United Kingdom and European Union signaled they have prepared a third package of sanctions against Russia, including on Russian President Vladimir Putin for his role in starting the largest military conflict on the European continent since World War II.

The United States is planning to impose sanctions on the Russian president as soon as today, according to wire services, making him the highest-profile target in the effort to impose costs for Russian aggression in its neighboring country Ukraine. The European Union and the United Kingdom approved on Friday an asset freeze on Putin and Foreign Minister Sergey Lavrov.

The unprecedented measure indicates Western powers are ready to use all cards to force Putin to stop his brutal war in Ukraine and from unleashing a major conflict in Europe. Austrian Foreign Minister Alexander Schallenberg said the move would be "a unique step in history toward a nuclear power, a country that has a permanent seat on the Security Council, but also shows … how united we are."

It should not be excluded that Russia still might be kicked off the SWIFT (Society for Worldwide Interbank Financial Telecommunication) payment system as demanded by Ukraine. This would impair the country's ability to receive payments for oil and gas shipments. The only two countries currently excluded from SWIFT are Iran and North Korea.

Earlier this week, U.S. and European allies said there were no plans to sanction Russia's energy industries, and instead targeted its financial and military complex. The developing humanitarian crisis in Ukraine might be quickly changing the calculus in Western capitals.

What's more, China, Putin's most powerful ally, moved to restrict financing for Russian commodities on Friday in a move that is an apparent attempt to comply with U.S. and European sanctions. According to Bloomberg News, the Industrial and Commercial Bank of China has ceased the issuance of dollar-denominated letters of credit for physical Russian commodities purchases, and the Bank of China has also restricted financing on some level, though details are not forthcoming.

China is Russia's most powerful partner and the two nations have been strengthening their bond for many years across diplomatic, economic and military realms. Chinese President Xi Jinping and Russia's Putin, two autocrats with some shared ideas about global power, had met 37 times as national leaders before this year. If any world leader could make Putin rethink his invasion of Ukraine, it would be Xi, went the thinking of some U.S. officials. Also on Friday, in a telephone call between Xi and Putin, Xi allegedly urged Putin to negotiate with Ukraine.

Meanwhile, Russian forces are closing in on the Ukrainian capital of Kyiv, home to three million people.

"This morning, we are defending our country all alone," said Ukrainian President Volodymyr Zelensky in a television address in Kyiv. "The most powerful nations of the world are just watching from afar. I asked all 27 members of North Atlantic Treaty Organization if Ukraine can join the alliance. Everyone is silent, everyone is scared."

After Ukrainian officials said they lost control of the decommissioned Chernobyl nuclear power plant, scene of the world's worst nuclear disaster, Russia claimed it was working with the Ukrainians to secure the plant.

Russia started its offensive early Thursday morning with an air-raid campaign that quickly gave Russians the superiority over Ukrainian airspace. Ukraine is a country of 44 million people occupying territory equal to that of France. Western intelligence officials assess that Russia's plan is to topple the government in Kyiv and install a Russian-friendly proxy government, but they don't yet know whether Putin will seek to occupy and hold Ukrainian territory afterwards.

On the session, NYMEX West Texas Intermediate for April delivery fell $1.22 to $91.59 barrel (bbl), and Brent traded on the Intercontinental Exchange declined $1.15 to settle just below $98 bbl. March RBOB futures slumped 4.37 cents to $2.7273 gallon, and front-month ULSD futures dropped 4.74 cents to $2.8495 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges