By Florence Tan
SINGAPORE (Reuters) – Oil prices recovered on Monday as supply concerns persisted after Washington imposed two rounds of sanctions in the past two weeks on Russia’s energy sector over the Ukraine war.
Brent crude futures climbed 34 cents, or 0.4%, to $81.13 a barrel by 0042 GMT after closing down 0.62% in the previous session.
U.S. West Texas Intermediate crude, which expires on Tuesday, was at $78.47 a barrel, up 59 cents, or 0.8%, after settling down 1.02% on Friday. The more active April contract rose 36 cents to $77.75 a barrel.
Both contracts gained more than 1% last week in their fourth successive weekly ascent, after the Biden administration sanctioned more than 100 tankers and two Russian oil producers. That led to a scramble by top buyers China and India for prompt oil cargoes and a global rush for ship supply as dealers of Russian and Iranian oil seek unsanctioned tankers to ferry their load.
The new sanctions are seen curtailing supply, at least in the near term, analyst Tim Evans said in newsletter Evans on Energy.
“Higher tanker rates on unencumbered vessels and a widening backwardation in crude oil calendar spreads have been among the notable ripple effects, reinforcing the concern over supplies,” he said.
Backwardation refers to a market structure where prompt prices are higher than those in future months, indicating tight supply.
The prompt Brent monthly spread widened in backwardation by 2 cents to $1.24 a barrel on Monday while the WTI spread was at 66 cents a barrel, up 17 cents.
Easing tension in the Middle East capped oil’s gains.
Hamas and Israel exchanged hostages and prisoners on Sunday that marked the first day of a ceasefire after 15 months of war.
