Oil futures: Crude stays firm as market awaits clarity on sanctions against Russia

Crude prices remained elevated in early US trading Feb. 22, but had pulled back from overnight highs as the market waited on clarity regarding potential sanctions by the West against Russia.

At 1433 GMT, NYMEX March WTI was up $2.98 at $94.05/b and ICE April Brent was $2.48 higher at $97.87/b.

Russia's recognition and subsequent deployment of peace-keeping troops into the breakaway eastern Ukrainian provinces of Donetsk and Luhansk drew sharp rebuke and the promise of sanctions from Western allies. On Feb. 21, the US sanctioned a number of individuals in the breakaway regions and said it will announce further sanctions later Feb. 22.

UK Prime Minister Boris Johnson said a "barrage" of economic sanctions would be announced on Feb. 22 in response to Russian troops moving into the two Ukrainian regions, while EU diplomat Josep Borrel said member states were planning to agree their response this afternoon.

NYMEX March RBOB was up 9.19 cents at $2.7615/gal and March ULSD was 8.25 cents higher at $2.8640/gal.

Overnight futures had traded more than $1 higher, with WTI touching a session high $96.00/b and Brent trading up to $99.50/b intraday.

US President Joe Biden has previously vowed to impose "swift and severe consequences" on Russia if it attacks Ukraine, including financial sanctions to restrict foreign capital and export controls to block US software and technologies.

Specific sanctions will depend on what happens next in the standoff, said Paul Sheldon, chief geopolitical adviser for S&P Global Platts Analytics.

"Anything less than an overt military incursion would depend on the circumstances," he added.

The "swift and severe" measures that have been threatened for months are expected to target Russia's major banks and the 55 Bcm/year Nord Stream 2 gas pipeline to Germany.

German Chancellor Olaf Scholz said Feb. 22 that the Nord Stream 2 gas pipeline from Russia could not now be certified after Russian President Vladimir Putin late-Feb. 21 publicly recognized eastern Ukraine's Donetsk and Luhansk regions as breakaway states.

"For the time being, the degree of escalation does not warrant the severe sanctions threatened to deter an invasion, with implications from current sanctions packages appearing more mild, but the threat of a larger scale confrontation still remains unclear," TD Securities analysts said in a note.

While sanctions against Russia's oil industry -- a key supplier of crude oil and products to Europe -- are not yet off the table, Platts Analytics does not expect the US to impose secondary sanctions on Russian oil customers, with the West "unlikely to jeopardize such large volumes," Platts Analytics said.

In the short term, "given that these [sanctions to be announced today] will target separatists rather than Russia, it should have no impact on energy flows. As has been the case for several weeks now, Russian developments will be key for determining price direction in the near term," ING Bank's Head of Commodities Strategy Warren Patterson and Senior Commodities Strategist Wenyu Yao said in a daily note.

Russian pipeline operator Transneft said Feb. 22 it expects no changes in crude volumes transported to Europe, while Russia intends to continue uninterrupted supplies of gas and LNG to global markets, Putin said Feb. 22 in his address to the Gas Exporting Countries Forum summit in Doha.

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