Oil Futures Waver as Traders Assess Sanctions on Russia

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 moved mixed in early trade Friday, with all petroleum contracts on track for hefty weekly gains as traders assess the impact of trade sanctions on Russia and potential disruption in oil shipments after Russian President Vladimir Putin's military attack on Ukraine.

After trading at $105.79 bbl Thursday, the highest trade since August 2014, the international crude benchmark Brent contract settled the session below the $100 bbl mark after U.S. President Joe Biden said there are currently no plans to sanction Russia's energy complex. Instead, U.S. sanctions are designed to target Russia's largest banks, state-owned enterprises, and financial markets which will have a long-term effect on its economy rather that immediately hit its ability to trade with Western nations.

European Commission President Ursula von der Leyen said a second tranche of sanctions would target 70% of the Russian banking market and key state-owned companies. However, both European Union and the United States decided for the time being not to cut Russia off of the SWIFT (Society for Worldwide Interbank Financial Telecommunication) payment system as demanded by Ukraine. The only two countries currently excluded from SWIFT are Iran and North Korea.

Russia is still the world's 12th largest economy, with an estimated gross domestic product of about $1.7 trillion last year, representing about 2% of the global economy. Russia is also one of the world's largest and most influential crude oil producers in the world. Alongside Saudi Arabia, Moscow leads a group of 23 oil exporters known as OPEC+, which has gradually boosted global production to meet soaring demand. Russia alone exports 7.5 million bpd of crude and petroleum products, with 2.3 million bpd of those volumes destined for Western Europe and the United States. It is also the single biggest exporter of natural gas. Analysts point that because of economic blowback in Europe and the United States, cutting Russia off a SWIFT is a last-resort option for Western allies.

Meanwhile, Russia is stepping up its attack on Kiev, the Ukrainian capital, with U.S. intelligence indicating the city of over three million may fall as early as this afternoon.

"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. The Vienna-based International Atomic Energy Agency added that there had been "no casualties or destruction at the industrial site."

Russia started its offensive early morning Thursday 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 that of France. Western intelligence officials assess that Russia's plan is to topple the government in Kyiv and install a Russia-friendly proxy government, but they don't yet know whether Putin will seek to occupy and hold Ukrainian territory afterwards.

Near 8 a.m. ET, NYMEX West Texas Intermediate for April delivery was flat near $92.75 bbl, and Brent traded just below $99 bbl. March RBOB futures softened to $2.77 gallon, and front-month ULSD futures eased to $2.8920 gallon.

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

Liubov Georges