Oil rebounds with tight supplies and prospects of new Russian sanctions

Workers walk as oil pumps appear in the background at the Ouzin oil and gas field in Kazakhstan’s Mangistau region, November 13, 2021. REUTERS/Pavel Mikheev

LONDON (Reuters) – Oil prices jumped more than $4 on Wednesday on tight supplies and increased prospects of new Western sanctions against Russia even as Moscow and Kiev hold peace talks.

Brent crude futures rose $4.09, or 3.7 percent, to $114.32 by 1341 GMT, reversing a 2 percent loss in the previous session.

US West Texas Intermediate crude futures rose $4.17, or 4%, to $108.41 a barrel, down 1.6% on Tuesday.

The recovery in crude oil prices “suggests that the oil market, at least, has a strong degree of skepticism about any ‘progress’ (in the peace talks),” Commonwealth Bank analyst Tobin Gorey said in a note.

The market saw sharp selling in the previous session after Russia promised to reduce military operations around Kyiv, but reports of attacks persisted. Read more

“We will see an additional 1 million barrels per day of Russian production at risk if relations with Europe worsen and an oil embargo is imposed, although we still see that as unlikely,” consultancy JBC Energy said in a note.

The United States and its allies are planning new sanctions on more sectors of the Russian economy considered critical to its continued invasion of Ukraine, including its military supply chains. Read more

Russia’s top legislator warned the European Union on Wednesday that exports of oil, grains, minerals, fertilizers, coal and timber could soon be priced in rubles, having previously demanded that “unfriendly” countries pay rubles for gas. Read more

And the focus of the oil market turned to tight supply after the American Petroleum Institute reported that crude stocks fell by three million barrels in the week ending March 25, three times the decline expected by 10 analysts polled by Reuters on average.

With the market kept tight, several sources close to the group said, major oil producers are likely to stick to their scheduled production target of 432,000 bpd when OPEC+ – the Organization of the Petroleum Exporting Countries and allies including Russia – meet on Thursday. . Read more

OPEC Secretary-General Muhammad Barkindo said that OPEC+ participants should “keep the path” regarding its decisions. Read more

However, oil prices are facing pressures from weak demand in China due to tight mobility restrictions and COVID-19-related lockdowns in multiple cities including the financial hub of Shanghai. Read more

Additional reporting by Sonali Paul in Melbourne and Muyu Shu in Beijing. Editing by Mark Potter and Elaine Hardcastle

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