Oil prices have dipped this morning after Europe stayed out of ramped-up Western sanctions on Russian energy supplies, easing fears of immediate supply shortages in already tight markets.
Brent Crude prices have dropped 2.17 per cent to $125.80 per barrel this morning.
The benchmark hit 14-year highs earlier this week, peaking at $139 on Monday,
WTI Crude also stalled, slipping 2.73 per cent to $121.00.
The US and UK announced bans on Russian commodity imports yesterday.
Downing Street revealed plans to phase out Kremlin-backed oil supplies.
Meanwhile, the US has opted to restrict oil, gas and coal from Russia with immediate effect.
United front fractured amid European reliance on Russian fossil fuels
Neither the US or the UK is particularly dependent on Russian fossil fuels – especially compared to the European Union (EU) which relies on Russia for around 40 per cent of it natural gas and 30 per cent of its oil.
Rather than following both countries with sanctions, trading bloc has instead unveiled plans to cut down its reliance on Russian energy by two thirds before the end of the decade.
This follows European leaders including German Chancellor Olaf Scholz and Dutch Prime Minister playing down the prospect of energy sanctions earlier this week.
This is the first real sign of distinctions between Europe and its allies as the West looks to put on a united front against Russia.
Chris Wheaton, investment analyst at Stifel, suggested macro-factors such as European supply shortages were likely to be the biggest factor over coming weeks in a highly volatile market.
He explained: “The US imports very little Russian oil – after all, the US is a bigger oil producer than Russia is – but Europe imports much more, and the redirecting of trade flows will cause a temporary dislocation in markets which could result in high oil prices- between $130-200 per barrel – between now and the end of 2022.”
Tensions have also eased following Russia and Ukraine reaching an agreement for a new 12-hour ceasefire to allow civilians to flee six of the worst-affected areas in Ukraine.
Ricardo Evangelista, senior analyst at ActivTrades noted prices remain highly elevated despite the dip and that markets were already responding as if sanctions were imposed.
This includes Shell announcing plans yesterday to withdraw business completely from Russia.
He said: “The move by the allies feeds into a wider dynamic that has seen a reduction in the demand for Russian energy products as traders hold back, fearing potential repercussions for dealing with Moscow. This progressive withdrawal of Russian oil from the markets is aggravating ongoing global supply issues which, alongside some speculative trading, is likely to maintain elevated oil prices.”
Oil prices were also weighed down this morning following suggestions from the International Energy Agency (IEA) there could be further crude releases, after multiple members teamed up to release 60m barrels to compensate supply disruptions last week.