Oil Prices Soar: Up Over 2% To Near $120 A Barrel, After Rising Over 7% On Monday

Crude oil prices extended their gains, soaring over 2 per cent to near $120 a barrel early on Tuesday after closing more than 7 per cent higher in the previous session, as the potential for more supply disruptions weighed on the market. 

Brent futures were last up 2.4% to $118.48 a barrel on the Intercontinental Exchange after having risen more than 7 per cent on Tuesday, tracking news that is going to weigh on the already-tight supply market.

Some European Union members are considering imposing sanctions on Russian oil. Attacks on Saudi oil facilities sent jitters through the market, keeping supply concerns to persist, with long oil and commodities positions the most crowded trades again on Tuesday.

According to the International Energy Agency, 3 million barrels per day of Russian crude and products would be off the market by April.

While the latest report from the Organization of the Petroleum Exporting Countries and allies, including Russia (OPEC+), showing some producers are still falling short of their agreed supply quotas, has added to investors' anxiety.

"The proposed ban is still some way from becoming policy because many EU nations oppose the ban," analysts for the Commonwealth Bank of Australia wrote in a note.

"Still, the fact that the ban is being discussed is a significant shift," the note added.

At the same time, Saudi Arabia has warned it would not bear responsibility for disruptions to global oil supply following attacks its oil facilities by Iranian-aligned Houthis. Reuters reported that the comments came after the group fired missiles and drones at Saudi oil facilities over the weekend, causing a temporary decline in refinery output.

That is bad news for India, as the country is dependent on oil imports for about 85 per cent of its needs.

State-run companies increased retail fuel prices for the first time on Tuesday after a 4-month hiatus and cooking gas prices were hiked by Rs 50 per cylinder for the first time since early October.

Reuters had reported of that fuel price hike quoting two sources late on Monday, and one of those sources said that there could be a regular increase in pump prices.