Oil futures rose on Wednesday, paring early losses, as the threat of new sanctions on Russia raised supply concerns, countering fears of weaker demand following a build in US crude stockpiles and Shanghai’s extended lockdown.
Brent crude futures were up 49 cents, or 0.5%, at $107.13 a barrel as of 0657 GMT, having fallen to $105.06 earlier in the session.
US West Texas Intermediate futures climbed 21 cents, or 0.2%, to $102.17 a barrel, after dipping to as low as $100.37 in an early trade.
The United States and its allies on Wednesday prepared new sanctions on Moscow over civilian killings in northern Ukraine, which President Volodymyr Zelenskiy described as “war crimes” demanding commensurate punishment. Russia denied targeting civilians.
“Concerns grew again over supply tightness as United States and Europe are stepping up sanctions on Russia,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.
Proposed EU sanctions, which the bloc’s 27 member states must approve, would ban buying Russian coal and prevent Russian ships from entering EU ports. Britain also urged G7 and NATO nations to agree a timetable to phase out oil and gas imports from Russia.
The growing supply concerns erased earlier price falls due to a stronger dollar, which makes oil more expensive for holders of other currencies, and a surprise build in US crude stockpiles.
The dollar edged up to its highest level in nearly two years on Wednesday after jumping overnight on more hawkish comments from a Federal Reserve official.
US crude and distillate stocks rose last week while gasoline inventories dipped, according to market sources citing American Petroleum Institute figures on Tuesday.
Crude stocks rose by 1.1 million barrels for the week ended April 1, against analysts’ forecast of a decline of 2.1 million barrels.
Demand worries also mounted after authorities in top oil importer China extended a lockdown in Shanghai to cover all of the financial center’s 26 million people.
“Higher dollar, an increase in US crude stockpile and concerns over weaker demand in China due to Shanghai’s continued lockdown added to pressure in early trade,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
“Oil prices will likely stay at around $100 a barrel for a while amid demand concerns and an expectation for no conflict in the Middle East during the Muslim fasting month of Ramadan, but they may rise again after Ramadan and as the US driving season kicks off,” he said.
Meanwhile, member states of the International Energy Agency (IEA) were still discussing how much oil they would together release from storage to cool markets, three sources told Reuters, adding that an announcement was expected in coming days.