Oil jumps as EU presses Russian embargo and Saudi refinery production hits

A view of Phillips’ 66 Los Angeles Refinery (front), which processes domestic and imported crude oil into gasoline, aviation, and diesel fuels and storage tanks for refined petroleum products at Kinder Morgan Carson Terminal (background), at sunset in Carson, California, United States, 11 March 2022. The photo was taken on March 11, 2022. The photo was taken with a drone. Photograph: Beng Guan/Reuters

SINGAPORE (Reuters) – Oil prices jumped more than $3 on Monday, with Brent crude above $111 a barrel, as European Union countries consider joining the United States in a Russian oil embargo, while a weekend attack on Saudi oil facilities caused tension.

Brent crude futures rose $3.74, or 3.5 percent, to $111.67 a barrel by 0739 GMT, adding to its 1.2 percent rise last Friday.

US West Texas Intermediate crude futures rose $3.98, or 3.8 percent, to $108.68, to continue a 1.7 percent jump last Friday.

Prices rose ahead of talks this week between European Union governments and US President Joe Biden in a series of summits aimed at toughening the West’s response to Moscow over its invasion of Ukraine.

EU governments will consider whether to impose an oil embargo on Russia. Read more

Early on Monday, Ukraine’s deputy prime minister, Irina Verchok, said there was no chance of the country’s troops surrendering in the besieged eastern port city of Mariupol. Read more

With little sign of easing the conflict, the focus is back on whether the market will be able to replace the sanctions-damaged Russian barrels.

“The Houthi attack on a Saudi power plant, warnings of a structural OPEC production shortfall and a possible EU oil embargo on Russia have sent oil prices higher in Asia,” Jeffrey Haley, chief analyst at OANDA, said in a note.

“Even if the Ukraine war ends tomorrow, the world will face a structural energy deficit thanks to Russian sanctions.”

Over the weekend, attacks by Yemen’s Iran-aligned Houthi group caused a temporary drop in production at a joint venture of Saudi Aramco’s refinery in Yanbu, adding to anxiety in a tense oil products market, where Russia is a major supplier and global stocks are at several year lows. Read more

The latest report from the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, together called OPEC+, showed that some producers were still falling short of agreed supply quotas.

Three sources told Reuters that OPEC + missed its production target by more than 1 million barrels per day in February, under its agreement to increase production by 400,000 barrels per day each month as it rolls back sharp cuts made in 2020.

The two OPEC nations with the ability to raise production immediately, Saudi Arabia and the United Arab Emirates, have so far resisted calls from major consuming nations to raise production faster to help lower oil prices.

US energy companies are also struggling to keep the number of active oil rigs high, despite strong prices. Read more

A poor supply outlook and rising prices prompted the International Energy Agency to outline ways on Friday to cut oil use by 2.7 million barrels per day within four months, from car assembly to lower speed limits and cheaper public transportation. Read more

This will help offset 3 million barrels per day of Russian crude and products that the International Energy Agency has estimated will be off the market by April. Read more

(Additional reporting by Sonali Paul in Melbourne and Florence Tan in Singapore; Editing by Shree Navaratnam and Clarence Fernandez

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