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Oil prices drop as Russian hub resumes loading; markets consider sanctions impact

The oil prices fell on Tuesday, as traders assessed the impact of Western sanctions against Russian flows, and supply concerns waned after the loading of cargo at a Russian hub was resumed following a drone strike in Ukraine.

Brent crude futures fell 28 cents or 0.4% to $63.92 per barrel as of 1100 GMT. U.S. West Texas Intermediate crude futures (WTI) were down 26 cents or 0.4% at $59.65 per barrel.

According to two industry sources, and LSEG data, the Russian port of Novorossiysk resumed oil loadings Sunday following a two-day suspension triggered a Ukrainian drone and missile attack.

In a note, IG analyst Tony Sycamore noted that crude oil prices are marginally lower as "reports indicate that loadings at Novorossiysk have resumed earlier than expected," he wrote.

The exports of crude oil from Novorossiysk, and the nearby Caspian pipeline consortium terminal, which together represent about 2.2 millions barrels per day, or roughly 2%, were stopped on Friday. Crude prices rose by more than 2%.

Now, traders are focusing more on the long-term effects of Western sanctions on Russian crude oil flows.

The U.S. Treasury reported that sanctions imposed on Rosneft in October and Lukoil in November are already cutting into Moscow's oil revenue and will eventually reduce Russian export volumes.

ANZ stated in a report that "Moscow crude oil has started trading at a substantial discount to global benchmarks."

According to a senior White House official, President Donald Trump will sign legislation imposing sanctions on Russia as long as the final decision is in his hands. Trump said that Republicans were drafting legislation to sanction any country that does business with Russia. He added that Iran may also be included.

Goldman Sachs predicted that oil prices would decline until 2026. The company cited a large supply wave which keeps the market in excess. Goldman Sachs said that Brent oil prices could reach $70 per barrel by 2026/2027, if Russian production drops more dramatically.

(source: Reuters)