Oil rose for a third day as the war in Ukraine neared the one-month mark without a conclusion in sight, exacerbating supply concerns over the loss of Russian crude.

Futures in New York rose 7.1 per cent to settle above US$112 a barrel on Monday. Several European Union countries are pushing for a fifth round of sanctions on Russia, though some remain opposed to including oil in those measures. The Kremlin said an EU ban on oil imports from Russia would have a profound effect on the global crude market and hit the continent the hardest. 

In weeks prior, the EU sanctioning Russian oil “seemed unrealistic given their reliance on Russian energy supply,” said Rohan Reddy, a research analyst at Global X Management, a firm that manages US$2 billion in energy-related assets. “It would basically shave off a full 4-5 per cent of global oil supply.”

The global oil market has been thrown into turmoil by Russia’s invasion of Ukraine, with the U.S. and Europe imposing sanctions on Moscow and crude buyers shunning the country’s cargoes. Brent neared US$140 a barrel earlier this month to hit the highest since 2008, before seeing a massive pullback that briefly put the market into bear territory. Prices have experienced unprecedented volatility, with frequent intraday swings of about US$10 and broader commodity markets seizing up amid a widespread liquidity crunch. 

The rally in oil prices has spurred importing nations to pressure other producers to step up supply, including members of the Organization of Petroleum Exporting Countries. Saudi Arabia said it can not be held responsible for any drop in oil output if it doesn’t get more help to deter attacks from Yemen. Houthi rebels attacked at least six sites across Saudi Arabia over the weekend, including some run by Aramco. Saudi Arabia has been facing calls from oil-consuming nations such as the U.S. to increase supply output. 

Amid calls for more production, Rystad Energy predicts that 2 million barrels a day of global oil demand could be lost this year due to the war, sanctions, and inflation. This would take consumption back to levels seen well before the pandemic.

The Biden administration is stepping up its response to Russia’s invasion. Later Monday, officials will brief energy companies including Exxon Mobil Corp. as well as banks on the war and ensuing sanctions. Separately, President Joe Biden is due to call counterparts in Europe before traveling to the region later this week.

Prices:

• West Texas Intermediate for April delivery rose US$7.42 to settle at US$112.12 a barrel in New York.
  • The more active May contract rose US$6.88 to settle at US$109.97
• Brent for May settlement increased US$7.69 to settle at US$115.62 a barrel.

As the war continues, the world’s three biggest oilfield-service providers are scaling back work in Russia. On Saturday, Baker Hughes Co. said it’s suspending new investments in operations there. That followed a similar statement by Schlumberger on Friday. Halliburton Co., the top provider of fracking services, has halted current and future work in the country.

Related coverage and commentary:

• U.S. ports are set to admit more Russian fuel oil than they’ve seen in eight months under contracts signed prior to the Biden administration’s ban on such shipments.
• Europe’s shift away from Russian natural gas means significantly more U.S. export projects need a quick go-ahead from investors, according to Sanford C. Bernstein & Co. LLC.
• India is eager to take more Russian crude at bargain prices as buyers from the U.S. to Europe shun its oil after the invasion of Ukraine.