Oil prices rose to $116 a barrel on Tuesday, contributing to a 7% gain on the previous day, helped by supply risks from a possible European Union oil embargo on Russia and concerns over attacks on Saudi oil facilities.
European Union foreign ministers are split on whether to join the US in banning Russian oil. Some countries, including Germany, say the bloc is too dependent on Russia’s fossil fuels to withstand such a move.
“It is not yet clear whether this will really happen,” writes Carsten Fritsch from Commerzbank in a statement, adding: “Such a decision requires unanimity.”
Brent crude was up 13 cents, or 0.1%, to $115.75 a barrel by 1326 GMT. US West Texas Intermediate Crude was up 11 cents, or 0.1%, at $112.23. Both contracts had settled at more than 7% on Monday.
Oil was pressured by a stronger US dollar, which rose after comments from Federal Reserve Chair Jerome Powell on Monday heralded more aggressive monetary tightening than previously expected.
A strong dollar makes crude oil more expensive for other currency holders and tends to weigh on risk appetite.
“The word ‘temporary’ in relation 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, the highest since 2008. Threats to supplies from attacks by Yemen’s Iran-allied Houthi group on Saudi power and water desalination plants fueled support.
Saudi Arabia said Monday it bears no responsibility for global supply shortages following the Houthis attacks, a sign of growing Saudi frustration with Washington’s handling of Yemen and Iran.
Later, the focus will be on the latest round of US inventory data, which analysts expect will show no change in crude oil inventories. The American Petroleum Institute, an industry group, will release its supply report later Tuesday.