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 $1.14, or 1.1 percent, at $107.78 a barrel as of 1115 GMT. US West Texas Intermediate futures climbed $1.42, or 1.4 percent, to $103.38 a barrel.
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The United States and its allies on Wednesday prepared new sanctions on Moscow over civilian killings in northern Ukraine, which President Volodymyr Zelenskyy described as “war crimes.” Russia denied targeting civilians.
“With allegations ramping up and new Western sanctions against Russia in the pipeline, further Russian economic retaliation looks inevitable,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
“These concerns have no doubt fed into the oil price trending higher, with volatility expected to continue as the geopolitical situation unfolds.”
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.
The head of the EU’s executive Ursula von der Leyen said the bloc was working on additional sanctions, including on oil imports.
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.
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.
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.
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