International oil prices drifted lower on Friday by 0.6 percent or 55 cents to $100.03 a barrel after gaining more than $1 in the early trade. Prices are set to drop around 3 percent for the week as consuming countries planned release of 240 million barrels from emergency stocks.
Analysts say that the emergency oil release, amounting to about 1 million barrels per day from May to the end of the year, might cap price rises in the short term, but would not fully cover volumes lost if more countries impose sanctions against Russia over its Ukraine invasion.
"Although this is the biggest release since the stockpile was created in 1980, it will fail to ultimately change the fundamentals in the oil market. It is likely to delay further increases in output from key producers," ANZ Research analysts said in a note.
Analysts further believe that the release may deter producers, including the US and Organization of the Petroleum Exporting(OPEC) shale producers, from accelerating output even with oil prices around $100 a barrel.
Investors are also assessing the fundamentals in the oil market amid uncertainties over slowing demand in China, one of the world's top oil importers, where cities have been locked down due to the latest wave of coronavirus infections.
In a fresh set of sanctions over the Bucha massacre, the US and its allies have imposed an embargo on Russian coal along with its ships entering EU ports, penalties on President Vladimir Putin’s and Foreign Minister Sergey Lavrov’s close kin. In continuation of its policy to target major Russian banks, the Biden administration has tightened restrictions on Sberbank and Alfa Bank, Russia’s largest privately-owned financial institution.
“Sberbank holds nearly one-third of the overall Russian banking sector’s assets and is systemically critical to the Russian economy. This action will freeze any of Sberbank’s and Alfa Bank’s assets touching the US financial system and prohibit US persons from doing business with them,” the White House said in a statement.
Experts believe that coal sanction is expected to limit any drop in oil prices in the near term. At the same time, the European Union is considering a ban on Russian oil to limit Russia’s war funding. The move to sanction the third-largest oil producer after the US and Saudi Arabia could skyrocket the oil prices in the future similar to the initial phase of the invasion.
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