TOKYO: Oil prices rose on Monday (April 18) as concerns grew over tighter global supply, with the worsening crisis in Ukraine raising the prospect of tougher sanctions by the West against top exporter Russia.
Brent futures were up $1.50, or 1.3 percent, to $113.20 a barrel at 12:30 a.m. GMT (8:30 p.m. Singapore time), and US West Texas Intermediate futures were up 98 cents, or 0.9 percent, to $107.93 a barrel.
Ahead of the Easter weekend, both contracts gained more than 2.5 percent on Thursday after news that the European Union could introduce a ban on Russian oil imports.
EU governments last week said the bloc’s executive was preparing proposals to ban Russian crude, but diplomats said Germany did not actively support an immediate embargo.
Those comments came before tensions in the Ukraine crisis mounted over the weekend, with Ukrainian soldiers resisting a Russian ultimatum to lay down their arms in the pulverized port of Mariupol on Sunday. Moscow, calling its actions in Ukraine a “special operation,” said its troops had taken the city almost completely, with no signs of a ceasefire.
The International Energy Agency had warned that as of May, about 3 million barrels per day (bpd) of Russian oil could be locked in as a result of sanctions or buyers voluntarily avoiding Russian cargoes.
Russian oil production continued to decline in April, falling 7.5 percent in the first half of the month from March, Interfax news agency reported Friday.
“The oil market is likely to maintain a bullish trend this week with limited additional supply from major oil producers to offset reduced flow from Russia,” said Kazuhiko Saito, chief analyst at Fujitomi Securities.
Rising US heating oil prices also contributed to the recent rally as expectations grew that the US petroleum market would tighten as a result of increasing demand for exports to Europe.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies in a group known as OPEC+, which includes Russia, have rejected Western pressure to increase production at a faster pace under a previously agreed deal to increase the offer.
An OPEC report last week showed OPEC output rose just 57,000 bps to 28.56 million bpd in March, trailing the 253,000 bpd increase OPEC is allowed under the OPEC+ agreement.
Libya further halted oil production from its El Feel oil field on Sunday, and two sources in the Zueitina oil port said exports there had been suspended after protesters calling on Tripoli-based Prime Minister Abdulhamid al-Dbeibah to resign took over the sites. .
However, US oil production forecasts are being revised upwards despite labor and supply chain constraints, as higher prices lead to more drilling and well completion activities, according to industry experts.