Oil falls towards $125 as investors weigh the US import ban

A worker walks in front of a crane at an oil field owned by Bashneft near the village of Nikolo Berezovka, northwest of the city of Ufa, Bashkortostan, Russia, January 28, 2015. REUTERS/Sergey Karpukhin

LONDON (Reuters) – Oil fell towards $125 a barrel in volatile trading on Wednesday as investors assessed the U.S. ban on Russian oil imports, and Russia announced a new ceasefire in Ukraine on Wednesday to allow civilians to flee.

Traders said the view that the US ban on Russian oil imports might not exacerbate the shortages kept a lid on prices, as did talk that Ukraine was no longer seeking NATO membership after some news reports this week on the issue. Read more

“Maybe this is playing its part,” Tamas Varga of BVM oil brokerage said on the issue of Ukraine’s NATO membership.

“The realization that the US import ban may not make the current supply shock worse than it was may also have triggered this bout of profit-taking,” he added.

Brent crude fell $2.27, or 1.8 percent, to $125.71 a barrel at 1105 GMT, after rising earlier above $131. US West Texas Intermediate (WTI) fell $3.19, or 2.6%, to $120.51.

Oil also fell, with the head of the International Energy Agency describing the agency’s decision last week to release 60 million barrels of oil reserves to offset supply disruptions after the Russian invasion as an “initial response” and that more could be released if needed. Read more

Oil has risen since Russia, the world’s second-largest oil exporter, launched what it called a “special operation” in Ukraine. Brent crude hit $139 on Monday, its highest since 2008.

Russia on Wednesday announced a new ceasefire in Ukraine to allow civilians to flee besieged cities, after days of mostly failed promises that left hundreds of thousands of Ukrainians trapped without access to medicine or fresh water. Read more

In addition to the US decision, Britain said on Tuesday it would phase out Russian imports and Shell said it would stop buying Russian crude. JPMorgan estimated that about 70% of Russian seaborne oil was struggling to find buyers. Read more

One potential source of additional oil supplies is Iran, which has been in talks with Western powers for months to restore a deal that lifted sanctions on Iran in return for curbs on its nuclear programme.

Iran’s chief negotiator for the Vienna talks returned to the Austrian capital on Wednesday. Read more

Amid fears of supply shortages, there are some indications that the market is not experiencing a shortage of crude oil yet.

US crude stocks rose by 2.8 million barrels, according to market sources, citing figures from the American Petroleum Institute, an industry group, on Tuesday. Official US inventory numbers are due at 1530 GMT.

Additional reporting by Yuka Obayashi and Mohi Narayan; Editing by Jason Neely and Bernadette Baum

Our criteria: Thomson Reuters Trust Principles.