Oil prices extend rally

Oil prices extended gains on Tuesday as some EU members discussed a potential oil embargo on Russia and attacks on Saudi facilities sent jitters through the market.

Front-month West Texas Intermediate futures were up $2.20, or 1.96%, to $114.32 a barrel on NYMEX and Brent futures were up $3.18, or 2.75%, to $118.80 a barrel on the Intercontinental Exchange at 4.40am GMT.

Both contracts had settled up more than 7% on Monday as the potential for more supply disruptions weighed on the market.

EU foreign ministers are split on whether to join the US in sanctioning Russian oil, with some countries including Germany arguing that the bloc is too dependent on Russia’s fossil fuels.

“It seems energy traders are growing more confident that supply shortages are just around the corner,” Edward Moya, analyst at Oanda, said in a note. Prices are rallying in response to geopolitical concerns in Ukraine and over attacks at Saudi Aramco sites, Moya added. “Right now it seems the risks are growing and that could push crude prices higher.”

Saudi Arabia has warned it would not bear responsibility for disruptions to global supply after attacks on its oil facilities by Iranian-aligned Houthis. The comments came after the group fired missiles and drones at facilities of the Saudi state oil firm over the weekend, causing a temporary decline in refinery output.

Analysts said that there are additional concerns over oil cartel Opec’s output that could worsen supply concerns.

“We estimate that the difference between Opec production targets and actual production stood slightly above 800,000 barrels a day last month and will rise to a whopping 1.15-million barrels in March,” consultancy JBC Energy said in a note.

Meanwhile, US crude oil inventories were likely to have been unchanged last week, a preliminary Reuters poll showed on Monday. Analysts estimated stockpiles of petrol fell about 2.1 -million barrels last week, while distillate inventories, which include diesel and heating oil, were expected to have decreased by 1.6-million barrels