Written by Noah Browning
LONDON (Reuters) – Oil futures rose on Wednesday, paring early losses, as the threat of new sanctions on Russia raised supply concerns, in the face of fears of weak demand in the wake of a buildup in US crude stocks and an extended Shanghai shutdown.
Brent crude futures rose $1.07, or 1%, to $107.71 a barrel by 0905 GMT, after falling to $105.06 earlier in the session.
US West Texas Intermediate Gulf futures rose $1.21, or 1.2%, to $103.17 a barrel, after falling to $103.17 in early trading.
The United States and its allies prepared, on Wednesday, new sanctions against Moscow over the killing of civilians in northern Ukraine, which President Volodymyr Zelensky described as “war crimes.” Russia denied targeting civilians.
“With new Western allegations and sanctions against Russia in the pipeline, more Russian economic retaliation appears inevitable,” said Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdowne.
“These concerns undoubtedly led to higher oil prices, with volatility expected to continue as the geopolitical situation evolves.”
The proposed EU sanctions, which must be agreed by the 27 member states, would ban the purchase of Russian coal and prevent Russian ships from entering EU ports.
European Commission President Ursula von der Leyen said the bloc was working on additional sanctions, including on oil imports.
Britain also urged the G7 and NATO countries to agree on a timetable for phasing out oil and gas imports from Russia.
Supply fears of lower prices earlier were allayed by the strength of the dollar, which makes oil more expensive for holders of other currencies, and a sudden increase in US crude inventories. [API/S]
The dollar rose to its highest level in nearly two years on Wednesday after jumping overnight on the back of more hawkish comments from a Federal Reserve official.
Demand fears also escalated after authorities in China, the largest oil importer, extended a lockdown in Shanghai to cover all 26 million residents of the financial hub.
Meanwhile, three sources told Reuters that IEA member countries are still discussing how much oil they will collectively release from storage to calm markets, adding that an announcement is expected in the coming days.
(Reporting by Noah Browning and Yuka Obayashi; Editing by Richard Boleyn and Mark Potter)
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