Oil prices fell early Friday, paring some of the previous day’s gain. However, new sanctions imposed on Russia’s two largest oil companies due to the war in Ukraine have fueled supply concerns. The likelihood of China’s state-owned oil giants suspending purchases of Russian oil has increased. Indian refiners are preparing to reduce Russian crude imports.
Brent crude futures were down 36 cents, or 0.55%, to $65.63 at 03:33 GMT. WTI Crude futures were down 33 cents, or 0.58%, to $61.43.
Crude prices are trading flat, with balanced profit-taking suggesting the market is not panicking about Russian supply and is likely to remain in a wait-and-see mode until the next phase of the war, which could escalate or de-escalate tensions.
Both indices rose more than 5% on Thursday and are poised for a weekly gain of nearly 7%, the largest increase since mid-June.
Putin remained defiant Thursday following the sanctions on Rosneft and Lukoil. Together, Rosneft and Lukoil account for more than 5% of global oil production. Company officials are likely to pressure the Kremlin leader to end the war in Ukraine due to the sanctions.
Trade sources said the sanctions has prompted Chinese state oil giants to suspend oil purchases from Russia.
Meanwhile, according to industry sources, refiners in India, the largest buyer of Russian oil by sea, are preparing to significantly reduce their crude oil imports.
Flows to India are particularly at risk. Given the diversification of crude sources and stock availability, the challenges facing Chinese refiners will be more limited.
The Organization of the Petroleum Exporting Countries (OPEC) is ready to close any market gaps by reversing production cuts.
The US has indicated its readiness to take further action, while Putin characterized the sanctions as a hostile move, saying he did not believe they would significantly impact the Russian economy and emphasizing Russia’s importance to the global market.
The UK imposed sanctions on Rosneft and Lukoil last week, and the European Union approved its 19th sanctions package, which includes a ban on liquefied natural gas imports from Russia.
The EU also added two Chinese refineries with a combined capacity of 600,000 barrels per day (bpd) and Chinaoil Hong Kong, the trading arm of PetroChina (601857.SS), to its sanctions list against Russia. According to a report published on Thursday by the official gazette, the EU added these sanctions to Russia.
According to US energy data, Russia will become the world’s second-largest crude oil producer after the US by 2024.
Investors are also focusing on next week’s planned meeting between Trump and Chinese President Xi Jinping.
Trade tensions between Washington and Beijing have been escalating, with both sides announcing retaliatory measures. The confirmation that the two leaders will meet next week appears to have defused the tension.