West Texas Intermediate crude fell and Brent tumbled to a five-week low on speculation that U.S. and European Union sanctions against Russia are unlikely to disrupt oil shipments.
Futures in New York fell 0.8 percent, while Brent dropped 1.8 percent. U.S. President Barack Obama imposed penalties on top Russian officials for supporting the secession of Crimea from Ukraine. About 97 percent of voters in Crimea chose to leave Ukraine and become part of Russia, the world’s biggest energy-producing country, in a referendum yesterday.
“The initial sanctions won’t have an impact on the flow of oil,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “They do have the potential of slowing the Russian economy.”
West Texas Intermediate for April delivery dropped 81 cents to settle at $98.08 a barrel on the New York Mercantile Exchange. Futures touched $97.37, the lowest intraday level since Feb. 7. The volume of all futures traded was 9.6 percent above the 100-day average at 3:47 p.m.
Brent for May settlement fell $1.97 to $106.24 a barrel on the London-based ICE Futures Europe exchange. It was the lowest close since Feb. 4. Trading volume was 22 percent lower than the 100-day average.
The European oil closed at an $8.62 premium to the May WTI contract. Brent, which is used to price more than half of the world’s crude and, unlike WTI, can be exported, is often more sensitive to changes to the global supply-and-demand balance.
“With Europe dependent on Russian exports of oil and gas and Russia depending on the earnings they provide, the market at this stage isn’t anticipating a disruption,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
Brent advanced 1.1 percent March 14, the last trading day before the referendum on the Black Sea peninsula. The U.S. and EU consider the election illegal and warned Russia not to annex Crimea. Russia said the poll “fully met international norms.”
The U.S. actions affect seven top Russian officials and four others from Ukraine whom the U.S. says threaten peace and security. They mark the broadest use of sanctions on Russia since the end of the Cold War, were made in concert with the 28-member EU, which imposed its own set of penalties on 21 individuals.
“The sanctions are underwhelming,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “They are not as stiff as they could have been. It looks like a certain amount of business, particularly in the energy field, will get done.”
Libyan crude output fell to 230,000 barrels a day from 408,000 after protesters shut a pipeline from Sharara, the country’s second-largest field, Mohamed Elharari, a state-run National Oil Corp. spokesman in Tripoli said yesterday.
The U.S. Navy thwarted the first attempt to export crude from a port controlled by rebels in eastern Libya. Navy SEAL commandos boarded the Morning Glory, a tanker that sailed on March 11 from Es Sider, the U.S. Defense Department said in an e-mailed statement today.
Investors added a net $59.4 million March 14 to U.S.-listed exchange-traded funds that invest in energy, equivalent to 1.6 percent of total assets, data compiled by Bloomberg show. They added $42.4 million to the United States Oil Fund, the biggest oil ETF.
Electronic trading volume on the Nymex was 499,537 contracts at 3:47 p.m. It totaled 530,524 contracts March 14, 3.6 percent above the three-month average. Open interest was 1.67 million contracts.