Florence Tan

(Reuters) – Oil prices jumped by $3 Monday with Brent at $110 a barr as the European Union considers joining the United States under a Russian embargo. Meanwhile, jitters were caused by a weekend attack against Saudi oil facilities.

The futures gained $3.44 (or 3.2%) to $111.37/barrel by 0443 GMT. That’s in addition to an increase of 1.2% last Friday.

U.S. West Texas Intermediate crude futures increased $3.54 or 3.4% to $108.24. This extends a 1.7% increase last Friday.

Pre-talks this week between the European Union and U.S. President Joe Biden, for a series summits which aim to toughen West’s reaction to Moscow’s invasion of Ukraine, saw prices rise.

EU countries will be evaluating whether Russia is subject to an oil embargo.

Iryna Verchuk, Ukraine’s vice prime minister, stated Monday that there is no way for the country’s troops to surrender under siege in Mariupol, an eastern port city.

The conflict was not easing and the attention shifted to the possibility that the Russian market could replace the barrels damaged by the sanctions.

Jeffrey Halley, OANDA senior analyst, stated in a note that oil prices have risen in Asia after a Houthi attack at a Saudi oil terminal and warnings about a structural shortage in production by OPEC. Also, a possible European Union oil embargo against Russia has caused oil prices to jump.”

Russian sanctions are causing a world energy crisis, even though the Ukraine conflict is resolved tomorrow.

Over the weekend, an attack by Yemen’s Iran aligned Houthi group resulted in a temporary decrease in production at a Saudi Aramco (SE:) Yanbu refinery joint venture, which feeds concern in an oil products market that is experiencing jittery conditions. Russia is the key supplier, and world inventories have fallen to multiple-year lows.

According to OPEC+ (Organization of the Petroleum Exporting Countries) and its allies, Russia, some producers still fall short of the agreed supply quotas.

Three sources tell Reuters that OPEC+ fell short of its production targets by more than 1,000,000 barrels per daily (bpd), in February. This was due to their agreement to increase output by 400,000 bpd every month, as well as reverse sharp reductions made in 2020.

Saudi Arabia and United Arab Emirates are two OPEC members that have the ability to immediately increase output. They’ve so far resisted requests from large consuming countries to boost production to lower oil prices.

U.S. energy companies also struggle to maintain an adequate number of oil rigs, in spite of high prices.

High oil prices and a poor supply outlook prompted Friday’s announcement by the International Energy Agency (IAA) to offer ways to decrease oil use of 2.7 million barrels per day within 4 months. This includes car-pooling, lower speed limits, and public transport that is cheaper.

It would also help to offset the estimated 3 million bpd Russian oil and product exports that would have been removed from the market by April, according to the IEA.