A gas pump is seen hanging from the ceiling at a petrol station in Seoul June 27, 2011.
A gas pump is seen hanging from the ceiling at a petrol station in Seoul June 27, 2011. Reuters / Jo Yong hak

Oil prices fell $2 after rising earlier in the session on Thursday amid uncertainty that the eurozone will be able to effectively sanction Russian energy exports, and after consuming nations announced a huge release of oil from emergency reserves.

Brent crude futures slid to $2.13, or 2.1%, at $98.94 a barrel at 12:05 p.m. EDT (1405 GMT), while U.S. West Texas Intermediate (WTI) crude fell $1.7, or 1.9%, to $94.36 a barrel.

Both benchmarks had plunged more than 5% in the previous session and hit their lowest closing levels since March 16.

The European Union's top diplomat, Josep Borrell, told a NATO meeting Thursday that new EU measures, including a ban on Russian coal, could be passed on Thursday or Friday and the bloc would discuss an oil embargo next.

However, the coal ban would take full effect from mid-August, a month later than initially planned.

"Nobody wants to bite the bullet and sanction Russian energy, which was propping up the market," said Bob Yawger, director of energy futures at Mizuho.

Prices were also pressured by fears that lockdowns in China due to a new wave of the coronavirus pandemic could impede recovery in oil demand.

Multiple outbreaks of COVID-19 had led to widespread lockdowns in Shanghai, China's most populous city.

"The demand situation in China is really not looking good, especially when we have so much new supply on the market," said John Kilduff, partner at Again Capital LLC in New York.

International Energy Agency member countries on Wednesday agreed to release 60 million barrels on top of a 180 million-barrel release announced by the United States last week to help drive down prices amid supply fears following Russia's invasion of Ukraine.

Japan will release 15 million barrels of oil from state and private reserves as part of the move, Kyodo news agency reported on Thursday.

"Although this is the biggest release since the stockpile was created in 1980, it will fail to ultimately change the fundamentals in the oil market," ANZ bank said of the U.S. release.

ANZ argued that the release is likely to delay further increases in output from key producers and could give OPEC+ more "breathing room amid calls to increase output further".

Other analysts however see the stocks release as a big relief amid concerns over market tightness.

"In view of these quantities, the previous concerns about tight supplies are no longer justified, as can also be seen from the price trend," Commerzbank said, noting that Brent prices have plunged by about $12 since the first announcement of a U.S. release came last week.

(Additional Ahmad Ghaddar in London, Reporting by Sonali Paul in Melbourne and Muyu Xu in Beijing; Editing by Jan Harvey and Bernadette Baum)