OIL FUTURES: Crude slides amid lack of energy sanctions on Russia

Crude prices extended their slide in early US trading Feb. 25 as concerns of near-term supply disruptions eased amid a lack of Western sanctions against the Russian energy sector.

At 1530 GMT, NYMEX April WTI was down 64 cents at $92.17/b and ICE April Brent was $1.44 lower at $97.64/b.

"Reports that the US sanctions package was specifically designed to allow energy payments to continue helped ease concerns over disruptive sanctions for the energy sector," TD Securities Analysts said in a note. "This is catalyzing a massive squeeze on the hawks as risk premia unwinds."

Russian Urals crude dropped to its lowest level relative to Dated Brent Feb. 24. CIF Rotterdam Urals was assessed at Dated Brent minus $11.23/b for Baltic loading cargoes and CIF Augusta at Dated Brent minus $10.93/b Feb. 24.

"It's worth reiterating that no supply has yet been disrupted, but some risk premium is likely to remain embedded into prices in response to the resulting uncertainty, as highlighted by the current discount on Russian crude grades," TD Securities Analysts said.

NYMEX March RBOB was down 3.14 cents at $2.7396/gal and March ULSD traded 4.08 cents lower at $2.8561/gal.

"We have seen the markets settled down after the spike we had yesterday ... the main negative driver today is the lack of sanctions that could impact flows of commodities in particularly gas and oil," Ole Hansen, head of commodity strategy at Saxo Bank, told S&P Global Platts.

The oil market is expected to be tight over the short term to medium term and the risk of potential new sanctions will be a concern, with participants reluctant to keep short positions over the weekend, according to Hansen.

"It is a very fluid situation ... The only thing we can be sure about is that volatility will remain high for the foreseeable future," Hansen said.

ICE Brent futures settled below the $100/b mark Feb. 24, after hitting an intraday high of $105.79/b, the highest level since August 2014, as US President Joe Biden stopped short of targeting the energy sector in its latest sanctions against Russia for its invasion of Ukraine.

Meanwhile, European Union has approved a preliminary package of sanctions against Russia that will target the country's oil refining and transport sectors, European Commission President Ursula von der Leyen said Feb. 25.

The announcement followed a special meeting of the European Council Feb. 24 in response to Russia's actions.

"We will hold the Kremlin accountable. The package of massive and targeted sanctions European Leaders approved tonight clearly demonstrates that," von der Leyen said in a statement.

"The second main pillar targets the energy sector. A key economic area, which especially benefits the Russian state. Our export ban will hit the oil by making it impossible for Russia to upgrade its oil refineries, which gave Russia export revenues of Eur24 billion [$26.8 billion] in 2019," she said.

The EU will also ban the sale of all aircraft, spare parts, and equipment to Russian airlines.

The EU's measures were closely coordinated with its allies including the US, UK, Canada, Norway, South Korea, Japan, and Australia, she said. The package of measures was expected to be approved by EU foreign ministers later Feb. 25.