© Reuters. FILE PHOTO: A gas pump is seen hanging from the ceiling at a petrol station in Seoul June 27, 2011. REUTERS/Jo Yong-Hak/File Photo
By Laura Sanicola
(Reuters) -Oil settled lower on Thursday, adding to weekly losses on uncertainty that the euro zone will be able to effectively sanction Russian energy exports and after consuming nations announced a huge release of oil from emergency reserves.
Prices were also pressured by fears that lockdowns in China due to a new wave of COVID-19 would slow the recover in oil demand.
Brent crude futures fell 49 cents, or 0.5%, to settle at $100.58 a barrel while U.S. West Texas Intermediate (WTI) crude fell 20 cents, or 0.6%, to settle at $96.03 a barrel. The previous session, both benchmarks plunged more than 5% to their lowest closing levels since March 16.
The European Union’s top diplomat, Josep Borrell, told a NATO meeting that new EU measures, including a ban on Russian coal, could be passed on Thursday or Friday and the bloc would discuss an oil embargo next.
However, the coal ban would take full effect from mid-August, a month later than initially planned.
“Nobody wants to bite the bullet and sanction Russian energy, which was propping up the market,” said Bob Yawger, director of energy futures at Mizuho.
India has continued purchases of discounted Russian crude oil imports, pushing out what analysts had predicted would be a loss of 2-3 million barrels per day of Russian oil from the global market.
“While such a loss is still possible once contracts roll off and India’s required refinery needs or storage is satisfied, such a development could still be weeks if not a couple of months away,” said Jim Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.
In China, multiple outbreaks of the virus have prompted widespread lockdowns in Shanghai, the most populous city.
“The demand situation in China is really not looking good, especially when we have so much new supply on the market,” said John Kilduff, partner at Again Capital LLC in New York.
On Wednesday, International Energy Agency (IEA) member countries agreed to release 60 million barrels on top of a 180 million-barrel release announced by the United States last week to help drive down fuel prices.
Japan will release 15 million barrels of oil from state and private reserves, Japan’s Kyodo news agency reported.
“Although this is the biggest release since the stockpile was created in 1980, it will fail to ultimately change the fundamentals in the oil market,” ANZ bank said of the U.S. release.
ANZ said the release would probably delay further increases in output from producers and could give OPEC+ more “breathing room amid calls to increase output further.”
Other analysts saw the stocks release as a big relief amid concerns over market tightness.
“In view of these quantities, the previous concerns about tight supplies are no longer justified, as can also be seen from the price trend,” Commerzbank (DE:CBKG) said, noting Brent prices have plunged by about $12 a barrel since the first announcement of a U.S. release last week.
(Additional Ahmad Ghaddar in London, Reporting by Sonali Paul in Melbourne and Muyu Xu in Beijing; Editing by Jan Harvey, Bernadette Baum and Paul Simao)
Oil settles lower on doubts about Russia oil sanctions