Oil prices soared to $116 a barrel on Tuesday, contributing to a 7% gain from the previous day, supported by supply risks from a possible European Union oil embargo on Russia and concerns about attacks on Saudi oil facilities.
European Union foreign ministers are divided over whether they want to join the United States in banning Russian oil. Some countries, including Germany, say the bloc is too dependent on Russia’s fossil fuels to resist such a move.
“It is still not clear whether this will actually happen,” Commerzbank’s Carsten Fritsch wrote in a report, adding that “such a decision requires unanimity.”
Brent oil rose 13 cents, or 0.1%, to $115.75 a barrel at 1326 GMT. US West Texas Intermediate crude added 11 cents, or 0.1%, to $112.23. Both contracts were more than 7% settled on Monday.
Oil was pressured by a stronger US dollar, which gained following comments by US Federal Reserve Chairman Jerome Powell on Monday that signaled more aggressive monetary policy tightening than previously expected.
A strong dollar makes crude more expensive for other currency holders and tends to weigh on risk appetite.
“The word ‘transient’ in reference to inflation is a distant memory, mainly due to rising commodity prices,” said Tamas Varga of broker PVM. “Central banks, led by the Federal Reserve, are poised to significantly increase the cost of borrowing.”
Brent hit $139 a barrel earlier this month, its highest since 2008, earlier this month. Threats to supply from attacks by Yemen’s Houthi group, on the side of Iran, on Saudi energy and water desalination plants provided additional support.
Saudi Arabia said Monday it would bear no responsibility for any global supply shortages following the Houthis attacks, in a sign of growing Saudi frustration with Washington’s treatment of Yemen and Iran.
Later, attention will turn to the latest round of US inventory data, which analysts expect to show no change in crude oil inventories. The American Petroleum Institute, an industry group, will release its supply report later Tuesday.