International Oil Prices Plunge Amid US-Russia Conflict and Inventory Concerns... WTI Drops 7%

Tensions Between US and Russian Leaders... Concerns Over Increased Production Due to Russian Retaliation
Oil Demand Expected to Decline Amid European Vaccine Shortage Concerns
US Oil Inventories Exceed Expectations by 1 Million Barrels

[Image source=AP Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] International oil prices plunged amid concerns over increased production by Russia due to escalating tensions between the United States and Russia, as well as forecasts of reduced oil demand caused by vaccine shortages in Europe. The surge in demand for safe-haven assets, leading to rises in U.S. Treasury bonds, the dollar, and gold prices, also exerted downward pressure on oil prices.

According to foreign media including CNBC, on the 18th (local time), the price of West Texas Intermediate (WTI) crude oil on the New York Mercantile Exchange (NYMEX) closed at $60.06 per barrel, a sharp drop of $4.60 (7.1%) compared to the previous session. Brent crude oil on the London ICE Futures Exchange, which had surpassed the $70 mark after a rally last week, also plunged by $4.72 (6.9%) to trade at $63.28 per barrel.

On that day, various factors combined to drive the sharp decline in oil prices, including the nature of the conflict between the U.S. and Russia, concerns over COVID-19 vaccine supply in Europe, and U.S. crude oil inventories exceeding expectations. The recent short-term rise in international oil prices also emerged as a factor encouraging the decline.

The Biden administration in the U.S. announced sanctions starting that day against seven senior Russian officials, five research institutes and security agencies, and 14 companies, concluding that the Russian government was behind the attempted poisoning of Navalny. In particular, Russia strongly reacted to President Joe Biden’s response in an interview with ABC the previous day, where he answered "yes" to a reporter’s question about whether he considered President Vladimir Putin a "killer." This led to growing concerns that Russia might retaliate by increasing oil production.

Additionally, concerns over vaccine supply in Europe raised fears of reduced oil demand. Many European countries halted AstraZeneca vaccine inoculations due to concerns about blood clot side effects, causing disruptions in vaccination efforts. Furthermore, the European Union (EU) hinted at possibly banning exports of vaccines produced within the EU due to shortages of AstraZeneca vaccines coming from the United Kingdom, intensifying worries about vaccine supply.

In this context, the U.S. Energy Information Administration (EIA) reported the previous day that U.S. crude oil inventories rose by 2.4 million barrels last week, exceeding forecasts by 1 million barrels, compounding concerns about demand shortages and inventory surpluses.

Experts expressed particular concern that the conflict between Russia and the U.S. could become a long-term source of instability in the crude oil market. Philip Streible, Chief Market Strategist at Blueline Futures, explained, "Tensions are escalating as the U.S. strengthens sanctions against Russia," adding, "Russia’s possible retaliatory measure would be to increase supply in the oil market to target U.S. shale oil producers."

This content was produced with the assistance of AI translation services.