18 March 2014, News Wires – Brent edged higher above $106 a barrel on Tuesday, with bargain-hunting kicking in after the benchmark fell nearly $2 in the previous session as there seemed little likelihood of the Ukraine crisis interrupting Russian oil supplies.
Crude prices had earlier rallied in advance of the reaction by the US and Europe to the outcome of the weekend referendum on whether Crimea should join Russia.
But prices then dropped when US and European sanctions imposed on Monday targeted Russian and Crimea individuals and not broad trade, leaving oil exports from the second largest producer in the world untouched.
“Initial US sanctions were confined to a few select Russian and Ukrainian officials and allayed fears of any major supply disruptions to energy markets,” said ANZ Research in a note on Tuesday.
Brent crude rose 30 cents to $106.54 per barrel early on Tuesday after dropping $1.97 to close at $106.24. The May Brent contract hit $106.16 a barrel on Monday, the lowest for a front month since 6 February.
US crude fell 13 cents to $97.95 after dropping 81 cents to close at $98.08 per barrel.
With Brent falling overnight to the lower end of its recent trading range of $105-$110 per barrel, bargain-hunting was inevitable, said Tan Chee Tat, investment analyst at Singapore’s Phillip Futures.
With few signs that Crimea’s vote to secede from Ukraine would result in widespread violence, attention in the oil markets turned to ample global supplies and worries about a weakening demand outlook.
Oil prices have also been dampened by estimates that US commercial crude inventories were expected to have risen last week by more than 2 million barrels, Tan said.
US crude inventories rose by 2.8 million barrels on average, according to a preliminary Reuters poll taken ahead of weekly data reports that are set to be released Tuesday and Wednesday, respectively.
In the midst of the situation in Ukraine, the European Union has begun discussing the need to reduce its reliance on Russian energy, British Foreign Secretary William Hague said on Monday.
Hague also said more names could be added to the sanctions list of 21 Russians and Ukrainians imposed by the EU, depending in part on how Russia reacted to Crimea’s application to join Russia following the weekend referendum.