The price of crude oil dropped sharply Tuesday after a big jump the day before over concern that Russia’s military advance into Ukraine could result in economic sanctions against one of the world’s major energy suppliers.
By early afternoon in Europe, benchmark U.S. crude for April delivery was down $1.58 to $103.34 a barrel in electronic trading on the New York Mercantile Exchange. On Monday, the contract added $2.33 to close at $104.92.
Brent crude, used to set prices for international varieties of crude, was down $1.83 at $109.37 a barrel on the ICE Futures exchange in London.
Russian troops have taken control of all Ukrainian border posts on the strategic peninsula of Crimea. There were fears that the Kremlin might carry out more land grabs in pro-Russian eastern Ukraine, adding urgency to Western efforts to defuse the crisis.
Still, the West appeared to have limited options. The clearest weapon at the disposal of the EU and U.S. appeared to be economic sanctions that would freeze Russian assets and scrap multi-billion dollar deals with Russia.
On Tuesday, Russian President Vladimir Putin pulled his forces back from the Ukrainian border but said Moscow reserved the right to use all means to protect Russians in Ukraine. He accused the West of encouraging an anti-constitutional coup in Ukraine and declared that any sanctions by the West against Russia would backfire.
Russia was the world’s second-largest producer of oil in 2012, accounting for 12.6 percent of global supplies, according to the International Energy Agency. It was also the world’s top exporter of natural gas that year, the IEA said. So, any economic sanctions against Moscow could limit world supply and push up prices, even as the weather is due to get warmer and European supplies are plentiful.
“The EU will hardly be able to do without Russian oil … especially since the oil embargo against Iran remains in force and oil production in Libya is still severely hampered,” said analysts at Commerzbank in Frankfurt in a note to clients.
In other energy futures trading on Nymex:
— Wholesale gasoline lost 4.41 cents to at $2.9762 per gallon.
— Heating oil fell 4.96 cents to $3.0309 per gallon.
— Natural gas added 2.4 cents to $4.516 per 1,000 cubic feet.