Talks of new Russia sanctions sparks new oil rally

The spectre of fresh sanctions on Russia and stalled nuclear talks with Iran triggered a new rally in oil futures on Tuesday.

Brent crude futures rose US $1.87 to $109.40 a barrel, while US West Texas Intermediate futures increased by  US $1.83 to  $105.11 a barrel at 0615 GMT.

The uptick in prices came as the United States and Europe planned new sanctions to punish the Kremlin over alleged war crimes by Russian troops in Ukraine.

Brent and WTI contracts both soared by more than $2 a barrel in early Asian trade after Japan said the International Energy Agency (IEA) was working out the details for a planned second round of coordinated oil releases from strategic reserves.

The bullish price sentiment was also supported by Saudi Arabia, the world’s largest crude oil exporter, raising its official selling prices for its flagship crude to the Asian market in May to a fresh record against regional benchmarks.

Saudi Arabia increased the OSP for May for Asia for Arab Light — the Kingdom’s flagship grade—to a record premium of $9.35 per barrel above the Oman/Dubai benchmark. The price for May has gone up by $4.40 a barrel over the April OSP for Arab Light of $4.95 a barrel premium over Oman/Dubai, Bloomberg estimated.

A Bloomberg survey last week showed that most Asian refiners and traders expected Saudi Arabia to once again significantly increase the prices of its crude going to Asia in May to a record premium over the Middle Eastern benchmarks, factoring in the current supply constraints.