Oil prices climbed on Tuesday as Russian oil and gas condensate production fell to 2020 lows and OPEC warned it would be impossible to replace potential supply losses from Russia.
Brent crude futures rose by $6.68, or 6.8%, to $105.16 a barrel by 12:04 p.m. EDT (1604 GMT). U.S. West Texas Intermediate was up $6.64, or 7%, at $100.93. On Monday, both benchmarks fell about 4%.
Russian oil and gas condensate production fell below 10 million barrels per day (bpd) on Monday to its lowest since July 2020, two sources familiar with data said on Tuesday, as sanctions and logistical constraints hampered trade.
Sources said Russia's average oil output fell to 10.32 million bpd on April 1-11 from 11.01 million on average in March, a decline of more than 6%.
The Organization of the Petroleum Exporting Countries (OPEC) warned it would be impossible to replace 7 million barrels per day (bpd) of Russian oil and other liquids exports lost in the event of sanctions or voluntary actions.
The European Union has yet to agree any embargo on Russian oil, but some foreign ministers said the option is on the table.
"The oil market is still vulnerable to a major shock if Russian energy is sanctioned, and that risk remains on the table," wrote Edward Moya, a senior market analyst with OANDA.
OPEC on Tuesday lowered its Russian liquids production forecast by 530,000 barrels per day (bpd) for 2022, but also cut its forecast for growth in world oil demand, citing the impact of Russia's invasion of Ukraine, rising inflation as crude prices soar and the resurgence of the Omicron coronavirus variant in China.
Oil market sinks on China demand fears
Indian Oil Corp (IOC), which bought Russian Urals in previous tenders, has removed the grade from its latest crude tender. U.S. President Joe Biden told Indian Prime Minister Narendra Modi late on Monday that buying more oil from Russia was not in India's interest.
IEA member nations are planning to release 240 million barrels over the next six months from May in an effort to calm the market.
While the release will ease immediate tightness, analysts suggested it will not solve the structural deficit caused by underinvestment and stocks will need to be replenished.
A preliminary Reuters poll showed U.S. crude oil inventories are likely to have risen by 1.4 million barrels in the week to April 8 after declining for three consecutive weeks.
The poll was conducted ahead of a report from the American Petroleum Institute due at 4:30 p.m. EDT (2030 GMT) on Tuesday.