Apr 06, 2022 03:05AM ET
By: AnalysisWatch
Oil futures contracts surged on Wednesday, eliminating early declines as the impending threat of new sanctions against Russia heightened supply concerns and countered worries about weaker demand due to a surge in U.S. crude inventories and an extension of the Shanghai freeze.
Brent crude futures were 49 cents, or 0.5 percent, higher at $107.13 per barrel at 0657 GMT, after falling to $105.06 earlier.
U.S. West Texas Intermediate crude futures were up 21 cents, or 0.2%, at $102.17 a barrel after falling as low as $100.37 in early trading.
The United States and its allies on Wednesday prepared new sanctions against Moscow over the killing of civilians in northern Ukraine, which President Volodymyr Zelensky called "war crimes" that should be punished accordingly. Russia has denied that it has targeted civilian killings.
Concerns about tightening supplies have risen again as the United States and Europe tighten sanctions against Russia, said Toshitaka Tazawa, an analyst at Fujitomi Securities Co. Ltd.
The proposed EU sanctions, which must be approved by the union's 27 member states, would ban purchases of Russian coal and prohibit Russian ships from entering EU ports.
Britain has also called on the G7 and NATO countries to agree on a timetable to phase out oil and gas imports from Russia.
Rising supply concerns have reversed an earlier price decline caused by a stronger dollar, which makes oil more expensive for holders of other currencies and a surprise increase in US crude inventories.
U.S. crude and distillate inventories rose last week, while gasoline stocks fell, market sources said on Tuesday, citing data from the American Petroleum Institute.
Crude inventories rose by 1.1 million barrels in the week ended April 1, while analysts had expected a decline of 2.1 million barrels.
Demand concerns also rose after authorities in China, a major oil importer, extended the Shanghai city shutdown to cover all 26 million residents of the financial center.