Oil prices increased on Monday as fears of tighter global supply grew, with the developing crisis in Ukraine raising the risk of more penalties from the West against Russia, the world’s leading exporter.
At 0030 GMT, Brent futures were up $1.50, or 1.3 percent, at $113.20 a barrel, while WTI futures were up 98 cents, or 0.9 percent, at $107.93 a barrel.
Both contracts surged more than 2.5 percent on Thursday, ahead of the Easter weekend holidays, on news that the European Union would phase in a ban on Russian oil imports.
Last week, EU governments said that the bloc’s executive was working on ideas to ban Russian oil, but officials said Germany was not actively backing an immediate ban.
Those remarks came before the Ukraine situation escalated over the weekend, with Ukrainian military defying a Russian demand to lay down arms in the pulverised port of Mariupol on Sunday. Moscow, which refers to its efforts in Ukraine as a ‘special operation,’ said its soldiers had nearly entirely captured the city, with no sign of a truce in sight.
Due to sanctions or importers voluntarily rejecting Russian shipments, the International Energy Agency has warned that around 3 million barrels per day (bpd) of Russian oil might be shut in from May onwards.
According to the Interfax news agency, Russian oil production continued to decline in April, falling by 7.5 percent in the first half of the month compared to March.
‘With minimal new supply coming from major oil producers to offset a lower flow from Russia, the oil market will likely stay on a bullish trend this week,’ said Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd.
‘Soaring heating oil prices in the United States were also a factor in the recent rise, as expectations grew that the US petroleum market would tighten due to increased demand for export to Europe.’
The Organization of Petroleum Exporting Countries (OPEC) and its allies in the OPEC+ grouping, which includes Russia, have defied Western pressure to increase output at a faster rate under a previously agreed-upon accord to enhance supplies.
According to an OPEC report released this week, OPEC output increased by only 57,000 barrels per day in March, falling short of the 253,000 barrels per day increase allowed under the OPEC+ agreement.
Libya halted oil production from its El Feel oilfield on Sunday, and two sources at the Zueitina oil port claimed shipments had been halted after protesters demanding the resignation of Tripoli-based Prime Minister Abdulhamid al-Dbeibah took control of the sites.
Despite labour and supply chain constraints, oil production projections in the United States are being revised upwards, according to industry analysts, as higher prices stimulate more drilling and well completion activity.
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