TOKYO: Oil prices rose on Monday (April 18) as concerns grew over tight global supplies, with a worsening crisis in Ukraine raising the prospect of tougher Western sanctions on the top exporter , Russia.
Brent crude futures were up $1.50, or 1.3%, at $113.20 a barrel at 00:30 GMT (20:30 Singapore time), and US West Texas Intermediate futures rose 98 cents, or 0.9%, to $107.93 a barrel.
Ahead of the Easter weekend holiday, both contracts gained more than 2.5% on Thursday after news that the European Union could phase out Russian oil imports.
EU governments said last week that the bloc’s executive was drafting proposals to ban Russian crude, but diplomats said Germany did not actively support an immediate embargo.
The comments came before tensions grew in the Ukraine crisis over the weekend, with Ukrainian soldiers resisting a Russian ultimatum to lay down their arms in the pulverized port of Mariupol on Sunday. Moscow, which calls its actions in Ukraine a “special operation”, said its forces had almost completely taken over the city, giving no sign of a ceasefire.
The International Energy Agency had warned that around 3 million barrels per day (bpd) of Russian oil could be tied up from May due to sanctions or buyers willfully avoiding Russian shipments.
Russian oil production continued to fall in April, falling 7.5% in the first half of the month from March, the Interfax news agency reported on Friday.
“The oil market is likely to remain on an uptrend this week with limited additional supply from major oil producers to offset reduced flow from Russia,” said Kazuhiko Saito, chief analyst at Fujitomi Securities.
“Soaring heating oil prices in the United States were also behind the recent rally, as the U.S. oil market was expected to tighten due to growing export demand to Europe.”
The Organization of the Petroleum Exporting Countries (OPEC) and its allies in a group known as OPEC+, which includes Russia, have pushed back against Western pressure to increase production at a faster rate as part of of a previously agreed deal to stimulate supply.
An OPEC report last week showed OPEC output in March rose just 57,000 bpd to 28.56 million bpd, lagging the 253,000 bpd hike allowed by OPEC under the OPEC+ deal.
To add to the pressure, Libya halted oil production from its El Feel oilfield on Sunday and two sources at the oil port of Zueitina said exports had been suspended there after protesters calling for the Prime Minister’s resignation. Tripoli-based minister Abdulhamid al-Dbeibah took control of the sites.
U.S. oil production forecast, however, is revised upwards despite labor and supply chain constraints as higher prices further boost drilling and well completion activity, according to industry experts.