Yahoo Finance Oil rally cools as IEA vows to release more reserves
Oil prices retreated from session highs on Wednesday, tumbling back towards $120 a barrel after Britain and the United States' decisions to ban imports of Russian crude sparked volatility in markets.
Benchmarks have soared in recent days as the Ukraine war intensified, with Brent, the basis for international prices, hitting its highest level since 2008 on Monday.
Brent crude (BZ=F) advanced 2.1% to $130.61, before trickling down to $129. US light crude (CL=F) rose 0.6% to $124.41 in electronic trading on the New York Mercantile Exchange at the time of writing.
Meanwhile, members of the International Energy Agency (IEA) are ready to release more oil from their emergency reserves to tame surging oil prices.
Fatih Birol, executive director of the IEA, told the Financial Times that the agency is "ready to bring" more oil to the markets by releasing additional stocks. Birol criticised Saudi Arabia and the United Arab Emirates for refusing to pump more crude.
Last week's announcement that the IEA would release 60 million barrels from its stockpiles has done little to stop soaring prices. Fatih said the "initial response" represented just 4% of IEA members’ reserves, insisting they could release a "substantial amount" more if required.
The agency said it will draw up a "10-point" plan to cut oil usage, especially in the transport sector.
Russia is the world’s largest oil exporter, and shipped almost 8 million barrels a day of crude and petroleum products to global markets at the end of last year, according to the IEA.
Around 60% of Russia’s crude exports go to Europe, with 2% to the UK, while around 8% goes to the US. China accounts for roughly 20%.
Russia's economy is facing increasing pressure amid economic sanctions and and a corporate exodus as it heavily relies on commodity exports.
Britain's transport secretary Grant Shapps announced that the UK will step up its production of oil and gas after the government unveiled plans to ban Russian crude imports and products by the end of 2022.
"We're fortunate in the UK that we don't buy proportionately very much Russian oil and gas and we do also produce our own so we'll step that up as well," Shapps told Sky News.
Read more: Stocks rebound as EU says it has enough gas for winter
On Tuesday, US president Joe Biden announced a ban on Russian oil as well as gas and coal imports.
"The American people will deal another powerful blow to Putin's leadership," he said. "Americans have rallied to support the Ukrainian people, and made it clear we will not be part of subsidising Putin’s war," Biden said.
He highlighted that the ban on Russian oil imports had bipartisan support in Congress, as well as widespread support nationwide amid skyrocketing gas prices.
Meanwhile, the EU has said that it is looking to reduce demand for Russian gas by two-thirds before the end of the year amid growing concern that Russian president Vladimir Putin could retaliate by cutting off gas supplies to the EU as the UK and US banned Russian oil.
European Commission president Ursula von Der Leyen said on Wednesday that the bloc has enough gas to last it through the winter.
Benchmark natural gas (NG=F) prices fell back from their recent record highs, as traders weighed the impact of potential Russia cuts.
Read more: UK set to ban Russian oil imports
Shell (SHEL.L) said on Tuesday that it will cut ties with Russia after it came under fire last week for purchasing a shipment of Russian crude at a record discount.
Shares in the company declined 2.3% in early trade on Wednesday in London.
The oil giant will halt all spot purchases of Russian crude oil, and said that it will not renew contract terms.
It will also withdraw from all hydrocarbons, including crude, petroleum products, gas and liquified natural gas in a phased manner. The group will close its service stations, aviation fuels and lubricants operations in the country. Russian oil currently makes up about 8% of Shell's working supplies.
Watch: Why are gas prices rising?
