Oil climbs on supply concerns as Iran talks stall
SINGAPORE (Reuters) - Oil prices gained about $1 on Monday as worries over tight supplies persisted after Germany warned of more sanctions on Russia and talks to revive the Iran nuclear deal paused.
Brent crude futures were up 94 cents, or 0.9%, at $105.33 a barrel by 07:28 GMT while US West Texas Intermediate crude was up 92 cents, or 0.9%. at $100.19.
Both contracts slipped $1 when markets opened on Monday but rebounded after Iran blamed the United States for pausing talks aimed at reviving their 2015 nuclear deal, which would allow a lifting of sanctions on Iranian oil supplies.
This added to concerns about tight supplies. Russian crude and oil products exports have been hit by Western sanctions and buyer aversion after Russia's invasion of Ukraine.
Germany said on Sunday that the West would agree to impose more sanctions on Russia in the coming days after Ukraine accused Russian forces of war crimes near Kyiv. Russia has rejected allegations of war crimes in what it calls a "special military operation" aimed at demilitarising Ukraine.
"Oil has crept higher today as Europe signalled that it is preparing new sanctions against Russia," said OANDA senior analyst Jeffrey Halley.
Estimates of the Russian oil supply loss range from 1 million to 3 million barrels per day (bpd), further tightening global markets that are already grappling with low inventories.
"Normalised stocks are at historical lows and the seasonally adjusted deficit remains large and getting worse," Goldman Sachs analysts said, adding that a large increase in jet fuel consumption is expected this summer with the return of international travel.
Goldman Sachs raised its 2023 oil price forecast to $115 a barrel from $110 a barrel on tight fuel supplies and firm demand despite COVID-19 lockdowns in China and a record release of strategic reserves by the United States.
Oil prices slumped about 13% last week after US President Joe Biden announced that up to 1 million bpd of oil would be sold from the US Strategic Petroleum Reserve (SPR) for six months starting in May. Biden said the release, the third in six months, will serve as a bridge until domestic producers can boost output and balance supply and demand.
The US Energy Department formally outlined a sale of oil from emergency reserves while members of the International Energy Agency (IEA) also agreed to release more oil on Friday. The IEA said the volume will be made public this week.
Despite calls from Biden for US energy firms to ramp up production, growth in rig count remains slow as drillers continue to return cash to shareholders from high crude prices rather than boost production.
In addition, the United Nations has brokered a two-month truce between a Saudi-led coalition and the Houthi group aligned with Iran for the first time in the seven-year conflict. Saudi oil facilities have come under attack by the Houthis during the conflict.
In China, the world's top oil importer, demand concerns persist after its most populous city, Shanghai, extended COVID-19 lockdowns. read more
China's transport ministry expects a 20% drop in road traffic and a 55% fall in flights during the three-day Qingming holiday that starts on Sunday after a flare-up of COVID-19 cases in the country.
