Oil slumped by more than three per cent Friday, wiping out gains from earlier this week despite the stoppage of supply flowing through a major Russian pipeline to Europe. Futures in New York lost as much as 2.5 percent, while Brent also fell to $71.98,
Prices in London had spiked briefly above $75 a barrel on Thursday as Russian flows were halted after customers complained of impurities. Prices have dropped since then as investors wait to see how long the outage will last.
Oil has climbed 40 percent this year amid output cuts by the Organization of Petroleum Exporting Countries and its allies and disruptions from Venezuela to Libya. It’s also had a boost earlier this week from the U.S. decision to end waivers on Iranian sanctions.
It remains unclear to what extent Saudi Arabia and other nations will pump more to make up for lost barrels. What’s also uncertain is the extent to which the Russian pipeline halt will upset oil balances in Europe.
“Fears of a supply shock were greatly exaggerated” after the Russian outage, PVM Oil Associates analyst Stephen Brennock wrote in an emailed report. “After all, refineries usually hold ample crude stockpiles to guard against such disruptions.
Little wonder then that the initial knee-jerk price reaction petered out.”
West Texas Intermediate for June delivery fell as much as $1.60, and was down $1.43 at $63.78 a barrel on the New York Mercantile Exchange as of 8:29 a.m. local time.
The contract closed down 1 percent on Thursday and is now slightly lower for the week.
Brent for June settlement was down $1.70, or 2.3 percent, at $72.65 a barrel on the London-based ICE Futures Europe exchange.
The contract rose as high as $75.60 on Thursday before closing down 0.3 percent. The global benchmark crude was at a premium of $8.90 to WTI on Friday.
Brent’s spike on Thursday followed a move by Poland, which receives oil through a section of the giant Druzhba pipeline, to stop Russian imports, saying shipments had become contaminated by organic chlorides.
Amid the disruption, oil traders are scrambling to find replacement cargoes for buyers across Europe and paying bumper premiums to do so.
