Oil prices traded higher on Monday in a volatile session as investors waited for any moves against Russian oil and gas exports that might come out of a meeting of leaders of the Group of Seven (G7) nations in Germany.
Brent crude futures rose $1.73, or 1.5%, to $114.82 a barrel by 12:25 p.m. ET (1725 GMT), while U.S. West Texas Intermediate crude was up $1.71, or 1.5%, at $109.25 a barrel.
The prospect of even tighter supplies loomed over the market as western governments sought ways to cut Russia's ability to fund its war in Ukraine, even though G7 leaders were also expected to discuss a revival of the Iran nuclear deal, which might lead to more oil exports from the OPEC member.
The club of wealthy nations on Monday vowed to stand with Ukraine "for as long as it takes", promising to tighten the squeeze on Russia's finances with new sanctions that include a proposal to cap the price of Russian oil.
"I think if they were to implement a price cap on sale and purchase of Russian oil, it's difficult for me to imagine how this is going to be implemented, especially when China and India have become Russia's biggest customers," said Houston-based oil consultant Andrew Lipow.
Commonwealth Bank of Australia analyst Vivek Dhar noted that there was "nothing stopping Russia from banning oil and refined product exports to G7 economies in response to a price cap, exacerbating shortage conditions in global oil and refined product markets."
Both crude benchmarks closed down for the second week in a row on Friday as interest rate hikes in key economies strengthened the dollar and fanned fears of a global recession.
Recession and interest rate hike fears have caused volatility and risk aversion in the futures markets, with some energy investors and trader paring back, while prices in the spot crude market has remained strong on high demand and a supply crunch.
But for now, pressing supply worries outweighed growing concerns.
Members of the Organization of the Petroleum Exporting Countries and their allies including Russia, known as OPEC+, will likely stick to a plan for accelerated oil output increases in August when they meet on Thursday, sources said.
The producer group also trimmed its projected 2022 oil market surplus to 1 million barrels per day (bpd), down from 1.4 million bpd previously, a report seen by Reuters showed.
OPEC member Libya said on Monday it might have to halt exports in the Gulf of Sirte area within 72 hours amid unrest that has restricted production.
Adding to the supply woes, Ecuador also said it could suspend oil production completely within 48 hours amid anti-government protests in which at least six people have died.
Traders also awaited news on when market-moving U.S. government oil inventory and other data would be published after it was not released last week due to server issues.