Oil Retreats On Washington's Refusal To Sanction Russian Crude

Meanwhile, questions are raised about what is being agreed to in the Iran nuclear talks: File Image/Pixabay

The U.S. stating that it won't sanction Russian crude oil caused oil prices to retreat on Friday from the $100 mark.

West Texas Intermediate dropped $1.92 to $90.89 per barrel at 12:00 p.m. EST, while Brent for April settlement fell $2.53 to $96.55 per barrel.

Amos Hochstein, the State Department's senior energy security adviser, told media, "The sanctions will not target the oil flows as we go forward: If we target the oil and gas sector for Putin, and in this case the Russian energy establishment, then prices would spike; perhaps he would sell only half of his product, but for double the price.

"That means he would not suffer the consequences while the United States and our allies would suffer the consequences."

Bart Melek, head of commodity strategy at TD Securities, noted that "It seems the U.S. and its allies want to inflict pain on Russia but do not want to impede their ability to deliver energy products to the world."

China briefly paused purchases of Russia's Urals grade due to concern of future complications in dealing with Moscow; also, some European lenders scaled back exposure to Ukraine and Russia in a threat to the credit lines essential to trade – contrary to the sentiment that led Europe and the U.S. not to bar Russia from the Swift international banking network.

Still, India – which along with the Philippines and Thailand stand to lose the most in Asia as high oil prices exacerbate inflation – had no qualms about doing business with Russia: on Friday it was reported that its refiners are snapping up Russian crude as prices plunge to new lows.

Traders said processors bought about 6 million barrels of Urals crude from the Black Sea port of Novorossiysk in recent days: that's the most India has purchased in three years and represents six out of eight planned March loadings for Suezmax ships.

India's actions are understandable if calculations by Nomura Holdings Inc. are accurate: it stated that a 10 percent rise in oil prices could add 0.4 percentage points to inflation in India (for a possible total of 5.8 percent) - with economic growth dropping by 0.2 percent.

Nomura said, "Most Asian consumers have not yet fully recovered from the pandemic and have lower savings, so higher inflation can squeeze real disposable incomes and weaken the incipient consumption recovery.

"We also see risk to corporate profit margins, as the entire input cost burden is unlikely to be passed on to consumers."

Meanwhile, statements made by Iran's nuclear chief throw into question the likelihood of the 2015 nuclear pact being renewed, contrary to what Iran and many observers predict.

Mohammad Eslami, head of Iran's Atomic Energy Organization, was quoted by news agency Faras as saying that the Islamic republic will continue to enrich uranium to 20 percent purity even after sanctions on it are lifted and the nuclear deal is revived.

Iranian officials had earlier told media that Iran had agreed to suspend its 20 percent and 60 percent enrichment if an agreement is reached in Vienna (the original deal capped enrichment levels at 3.67 percent, far below the roughly 90 percent that is weapons-grade).