Oil rallied above $100 a barrel after the European Union said it was working on new Russian sanctions, while Saudi Arabia hiked its prices for all its buyers.
West Texas Intermediate rose 4% on Monday to top $103 a barrel. The European Union condemned Russia for alleged atrocities by its military in several Ukrainian towns, saying it will work on additional sanctions against Moscow as a matter of urgency. French President Emmanuel Macron said the group will discuss possible sanctions on oil and coal, while German Finance Minister Christian Lindner said all economic ties with Russia must be severed as soon as possible.
Saudi Arabia raised prices for customers in all regions. State producer Saudi Aramco hiked its Arab Light price to Asia by $4.40 a barrel from a month earlier, a large increase that pushed prices further into record territory.
Last week, oil prices experienced their biggest weekly decline in two years after the U.S. announced another release from the Strategic Petroleum Reserve. Allies within the International Energy Agency will also tap stockpiles, with details expected this week. After the U.S. move, the structure of the futures curve has weakened, indicating traders think supply could be less tight.
“The U.S. has already made its contribution known which will go some way to easing the tightness in the market and supply shock from Russia where sanctions are biting,” said Craig Erlam, senior market analyst at Oanda.
“This is only a temporary solution, but offers a buffer over the next six months as producers ramp up production, including OPEC+ which has until now refused to accelerate its efforts in any significant way,” he said.
Vitol Group, the world’s biggest independent oil trader, said over the weekend that oil prices could be higher given the risk of supply disruption from Russia, but that the market is still trying to establish exactly how many barrels have been lost.
At the same time, China is grappling with a renewed coronavirus outbreak that’s hurting oil consumption. Shanghai’s 25 million residents are almost all under some form of lockdown, with state media reporting a case infected with a new subtype of the omicron variant.
There are plenty of factors outside of the war in Ukraine that traders are tracking, too. Iran said that it’s close to reaching an agreement with the U.S. amid stop-start talks to revive the nuclear accord between the two countries. If concluded, a pact may boost official Iranian crude exports.
