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Picture: REUTERS
Picture: REUTERS

Singapore — Oil futures extended gains on Tuesday as the US and Europe planned new sanctions to punish Moscow over alleged war crimes by Russian troops in Ukraine, adding to concerns about supply disruptions, while Iran nuclear talks stalled.

Brent crude futures rose $1.20, or 1.1%, to $108.73 a barrel, while US West Texas Intermediate futures were up $1.25, or 1.2%, at $104.53 a barrel at 4.20am GMT.

Both contracts briefly jumped more than $2 a barrel in early Asian trade after Japanese industry minister Koichi Hagiuda said the International Energy Agency (IEA) was still working out details for a planned second round of a co-ordinated oil releases.

Global crude futures had settled up more than 3% on Monday on the threat of more sanctions on Russia over civilian killings in Ukraine and after a pause in Vienna on talks to revive the Iran nuclear deal, which could put more Iranian barrels into the market. Iran blamed the US for halting the talks.

“The geopolitical tension is most likely to keep the oil price gaining in the coming days despite efforts made by US and allies,” said Tina Teng, a markets analyst at CMC Markets APAC & Canada, referring to the co-ordinated oil release by consuming countries.

“In the long run, oil prices may continue the upside momentum due to supply shortfalls and hedging demands to counter high inflation.”

Consultancy Wood Mackenzie on Monday estimated EU members and advanced economies including Japan and South Korea could “swap” 650,000 barrels a day of Russian crude oil with similar grades and volumes. These would primarily come from Middle East volumes that are normally bought by China and India.

India’s state-run Mangalore Refinery and Petrochemicals bought 1-million barrels of Russian Urals for May loading, in a rare move driven by the steep discount offered.

“Global crude oil trade will rebalance by ‘crude swapping’ between ‘self-sanctioning’ advanced economies and developing markets,” said Alex Sun, a managing consultant for Wood Mackenzie, noting that a steep discount for Russian Urals barrels has created a buying opportunity for China to fill declining strategic reserves.

Reuters

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