New York — Oil jumped about 4% to over $108 a barrel on Monday, as mounting civilian deaths in Ukraine increased pressure on European countries to impose sanctions on Russia’s energy sector, prompting new concerns from market participants around tighter supply.
Global benchmark Brent crude was up $3.85, or 3.7%, to $108.24 a barrel by 11:21 a.m. EDT (1521 GMT). U.S. West Texas Intermediate crude rose $4.11, or 4.1%, to $103.38 a barrel. Both contracts were down more than $1 earlier in the session.
German Chancellor Olaf Scholz said Russian President Vladimir Putin and his supporters would “feel the consequences” of events in Bucha, outside the capital Kyiv, where a mass grave and tied bodies shot at close range were found.
Western allies would agree on further sanctions against Moscow in coming days, he said, though the timing and reach of the new package was not clear.
France’s President Emmanuel Macron suggested sanctions on oil and coal, adding there were very “clear clues pointing to war crimes” by Russian forces.
Russia’s invasion in February has heightened supply concerns that were already underpinning prices. Sanctions imposed on Russia and buyers’ avoidance of Russian oil have already led to a drop in output and raised fears of larger losses.
“As the U.S. and EU reduce purchases of Russian oil, it leaves China and India as the main customers that remain and many of the refineries in those countries might be reluctant to purchase Russian oil with the negative public relations associated,” said Andrew Lipow, president of Lipow Oil Associates in Houston.
Crude dropped by about 13% last week after President Joe Biden announced a record U.S. oil reserves release and as International Energy Agency members committed to further tapping reserves. Brent crude hit $139 last month, its highest level since 2008.
“The massive release of 1 million barrels per day over a period of six months in the United States alone is likely to ensure that the oil market is no longer acutely undersupplied in the second and third quarters,” Commerzbank’s Carsten Fritsch wrote in a report.
Oil also gained support on Monday from a pause in talks in Vienna to revive the Iran nuclear deal, which would allow a lifting of sanctions on Iranian oil. Iran on Monday blamed the United States for the halt.
Downward pressure came from a truce in Yemen, which could ease threats to supply in the Middle East.
The United Nations has brokered a two-month truce between a Saudi-led coalition and the Houthi group aligned with Iran for the first time in the seven-year conflict. Saudi oil facilities have come under Houthi attack during the fighting.
*Stephanie Kelly; Alex Lawler & Florence Tan & Isabel Kua; Editing: Marguerita Choy & Mark Porter – Reuters
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