Brent loses as market shrugs off EU sanctions on Russian energy

The front-month ICE Brent contract has declined by $1.13/bbl on the day from Friday, to trade at $68.91/bbl at 09.00 GMT.

IMAGE: Oil storage tanks. Getty Images

Upward pressure:

Oil has retained some ground after official drilling figures showed a decline in US oil rigs. The total number of oil rigs fell by two over the week to 422, according to Baker Hughes.

“Despite oil prices having been more stable in recent weeks, the US oil rig count continues to fall,” two analysts from ING Bank noted.

The US oil rig count is seen as an indicator of future oil production. It reflects how much oil drilling activity is happening or expected to happen in the shale sector.

In a tight market, any signal of reduced future supply can put upward pressure on Brent’s price.

“This is the 12th consecutive week of declines, taking the cumulative decline to 53 over this period,” said ING analysts.

Downward pressure:

Brent’s price has moved lower as market participants showed little reaction to the EU’s latest sanction package against Russia.

Last week, the European Union (EU) adopted the 18th package of economic sanctions against Russia, aimed at limiting oil revenues flowing to its war chest.

The EU has targeted 105 vessels that are allegedly a part of the Russia's shadow fleet used to circumvent the price caps set on Russian crude and oil products. It has also lowered the oil price cap for Russian crude from $60/bbl to $47.60/bbl.

“Oil barely blinked at the EU’s latest attempt to tighten the screws on Russian energy,” said SPI Asset Management managing partner Stephen Innes.

The sanctions will come into force on 3 September.

By Aparupa Mazumder

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