Russia Sanctions Focused on Individuals Seen Bearish for Crude

U.S. sanctions on Russia that were announced yesterday are probably bearish for oil because they focused on individuals rather than the nation’s largest companies, according to energy analysts.

Brent crude’s premium to West Texas International narrowed the most in four months yesterday. The U.S. sanctions target seven Russian executives and officials and 17 companies controlled by President Vladimir Putin’s allies, including OAO Rosneft head Igor Sechin. The nation’s largest companies were not included and the sanctions were perceived as “weak” by some traders, Andrey Kryuchenkov, a London-based analyst at VTB, a Russian investment bank, said by e-mail.

“The new U.S. sanctions list was not as tough as some expected,” Olivier Jakob, managing director of Petromatrix GmbH, a Zug, Switzerland-based consulting firm, said by e-mail today. “Brent was softer on the announcement.”

President Barack Obama’s administration is seeking to pressure the Kremlin into reining in pro-Russian separatists in eastern Ukraine. The European Union and the U.S. say Russia hasn’t lived up to an accord signed April 17 in Geneva intended to defuse the confrontation between the Ukrainian government and separatists backed by the authorities in Moscow. The U.S. and the EU warned they will levy penalties on Russian industries if Putin escalates by sending troops into Ukraine.

Brent for June settlement rose 79 cents to $108.91 as of 2:11 p.m. in London. It traded $7.45 higher than WTI today in London. That premium to the U.S. futures contract narrowed $1.70 yesterday, the most since December. There were also signs yesterday a Libyan port will resume cargoes, potentially adding to the region’s oil supply.

Not Harsh

“New sanctions against Russia by the Obama administration were not as harsh as expected,” JBC, a Vienna-based consulting firm, said in an e-mailed report today.

The U.S. sanctions included tanker-car operator OOO Transoil, pipeline builder Stroytransgaz, and head of Russian Technologies Sergey Chemezov, the U.S. Treasury Department said. U.S. law bars American citizens from dealing with individuals and companies on the list.

“The risk premium in Brent was somewhat reduced yesterday,” VTB’s Kryuchenkov said. “Outright energy sanctions are unlikely.”

Libya’s state-run oil company said yesterday Zueitina, one of its crude ports, is closer to shipping again after months of protests blocked cargoes.

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