WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange extended gains into early trade Tuesday, with the U.S. and international crude benchmarks adding to Monday's gains after some European leaders pushed for a discussion on the possibility of extending sanctions to Russia's oil and coal sectors in response to egregious atrocities witnessed against Ukraine's civilian population in the now liberated areas surrounding the capital city of Kyiv.
Russia's invasion of Ukraine remains the key bullish driver in the oil market amid tightening restrictions on finance and shipping Russian energy exports that continue to hamper the country's oil industry from wellhead production to refinery output. Reports of horrific war crimes in the Kyiv suburb of Bucha is almost certainly to prompt further measures this week when European Union officials gather on Wednesday. French President Emmanuel Macron said on Monday there is "clear evidence of war crimes" in Bucha that demand new punitive measures, adding that "I'm in favor of a new round of sanctions and in particular on coal and gasoline."
Germany, however, remains a key opponent of stricter measures, with about half of Germany's imports of gas and hard coal, and about one-third of its oil imports originating in Russia. In total, Germany depends on Russia for about one-third of its total energy consumption. Should Germany cut off Russian gas imports, it would mostly affect the industrial backbone of the German economy -- a step politicians have been reluctant to take. Instead, Germany expelled 40 Russian diplomats and Lithuania threw out its Russian ambassador in the aftermath of Bucha massacre.
The United States and United Kingdom have already moved to ban Russian oil and mounting civilian casualties in Ukraine is piling pressure on governments to take further steps against Russia.
Further supporting the oil complex, Organization of the Petroleum Exporting Countries continued to struggle to meet their production quota in March, with the producer group managing to raise output by just 90,000 bpd, according to surveys from Reuters and Bloomberg. The alliance agreed to increase production by 400,000 bpd last month -- a rolling monthly target that has been consistently missed since the second half of 2021. Outages in some African members partly offset increases by Saudi Arabia and other Gulf producers.
In a further sign of global oil supply tightness, as well as rising demand for Mideast cargos as buyers shun Russian exports, Saudi Arabia has raised May selling prices for all regions. Saudi Aramco increased its Arab Light crude for next month's shipments to Asia to $9.35 bbl above the benchmark it uses, a record differential. For Northwest Europe-bound crude, Aramco lifted its Extra Light grade the most, by $3.80 to an $8.10 bbl premium to ICE Brent, and its Light grade increased $3 to a $4.60 bbl premium. Arab Medium was increased $1.40 to a $1.90 bbl premium, while Arab Heavy rose 30cts to a $1.10 bbl discount to ICE Brent. For U.S.-bound crudes, Aramco increased all grades by $2.20 from April. The April Extra Light OSP was set at a $7 bbl premium over ASCI. Arab Light, Medium, and Heavy grades were up as well at premiums of $5.65 bbl, $4.95 bbl, and $4.50 bbl, respectively. The price move was largely expected by the market due to volatility spurred by the Russia-Ukraine war.
Near 7:30 a.m. ET, NYMEX May West Texas Intermediate futures advanced $0.63 to $103.89 bbl, and the ICE June Brent contract gained $0.56 to $108.09 bbl. NYMEX May ULSD futures declined 2.45 cents to $3.5235 gallon, and the May RBOB contract jumped 2.19 cents to $3.2200 gallon.
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