Roller Coaster Oil Trading Ends In Tumble Over Uncertainty About Further Russia Sanctions

Meanwhile, Canada vows to help Europe decrease dependency on Russian oil: File Image/Pixabay

Oil lived up to its roller coaster reputation as a trading commodity on Thursday by tumbling 2.3 percent and almost wiping out the gains made in the previous session; among the reasons for the sell-off was uncertainty over when or if further punishment by the west will be levied against Russia for its invasion of Ukraine.

West Texas Intermediate fell $2.59 to settle at $112.34 per barrel, while Brent dropped $2.57 to $119.03 per barrel.

Rebecca Babin, senior energy trader at CIBC Private Wealth Management, said, "Crude trading is choppy as we await further details from the NATO meeting today and see where Europe's red line will be to sanction Russian Energy.

"The headline risk remains exceptionally high with liquidity remaining low."

Trading will undoubtedly be influenced in coming days by the outcome of U.S. president Joe Biden joining back-to-back summits with NATO, the Group of Seven, and the EU, in a bid to remove Russia from the G-20; Biden on Friday will visit Poland, where the biggest number of displaced Ukrainians now resides.

But while Russia is increasingly being shunned on the international stage, its oil isn't going totally to waste: India processors are doing business with the former Soviet Union, and traders say that China is "discreetly" purchasing cheap crude.

Meanwhile on Thursday, JPMorgan cut its second-quarter demand forecast by 1.1 million barrels per day (bpd), and reduced the outlook for the two remaining quarters of 2022 by about 500,000 barrels.

JPMorgan added that it believes the oil market's "extreme aversion" to Russian crude will subside; therefore, it forecasts "stranded" Russian oil falling from 3.5 million bpd in March to 2 million bpd in April and 1 million thereafter.

Still, the chaos caused by the Russian invasion is beneficial to industry in some countries: on Thursday Jonathan Wilkinson, energy minister for Canada, stated that his nation will increase oil and gas exports by the equivalent of 300,000 bpd to help those who are trying to shift away from Russian supplies.

Ottawa is also discussing with European countries about supplying them with liquefied natural gas; although Canada has no LNG export terminals yet, Shell Plc, Petroliam Nasional Bhd, and other companies are building a large one on Canada's west coast that will be ready for business by 2025.