Oil prices gained for a fourth straight session on Wednesday with tight supply worries offsetting concerns about a weaker global economy.
Brent crude futures for August were up 87 cents to $118.85 a barrel by 1132 GMT. The August contract will expire on Thursday and the more-active September contract was at $114.79, up 99 cents, or 0.87%.
U.S. West Texas Intermediate (WTI) crude futures were up $1.20, or 1.1%, to $112.96 a barrel.
Both contracts rose more than 2% on Tuesday as concerns over tight supplies due to Western sanctions on Russia outweighed fears of that demand may slow in a potential future recession.
Prices rose as G7 countries agreed to explore options to impose price caps on Russian oil exports.
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“Given that almost 1/5 of global oil producing capacity today is under some form of sanctions (Iran, Venezuela, Russia), we believed there is no practical way to keep these barrels out of a market that was already exceptionally tight,” JP Morgan said in a research note.
Norbert Rucker from Julius Baer said the price cap concept was difficult to grasp given the presence of multiple oil prices for multiple grades and thousands of actors along the supply chain.
“Buyers would need to collude in a cartel and build a credible `threat’ backdrop, both of which are challenging,” he said.
Also supporting prices were concerns about the ability of Saudi Arabia and the United Arab Emirates to activate their spare capacity to make up for lost Russian supply.
French President Emmanuel Macron said this week he was told that these producers will struggle to increase output further.
“Investors made position adjustments, but remained bullish on expectations that Saudi Arabia and the United Arab Emirates would not be able to raise output significantly to meet recovering demand, driven by a pick-up in jet fuels,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
OPEC and OPEC+, which includes allies such as Russia, began a series of two-day meetings on Wednesday with sources saying chances of a big policy change look unlikely this month.
Analysts also warned that political unrest in Ecuador and Libya could tighten supply further.