Crude’s historic rally has left futures technically overbought, with the relative strength index for WTI near 74 (a reading of more than 80 is viewed as extreme). “The market will need to suck in new participants who are not necessarily crude oil traders to trade higher — needs to suck in newbies — and top off the rally before a much deserved pullback flushes the weaker length from the scene,” said Robert Yawger, executive director for energy futures at Mizuho Securities, in a note. A scramble for U.S. and Brent crude comes as global buyers have been shunning Russian oil, even at deeply discounted prices.

OPEC+ earlier this week decided to stick with its plan to increase output by 400,000 barrels a day in April, continuing to resist calls for more aggressive production increases. Analysts said the decision by the International Energy Agency to release 60 million barrels from the emergency oil reserves of member countries earlier this week was also insufficient to balance the current demand, against the backdrop of the Ukraine war.

Natural gas remained lower after the Energy Information Administration reported a withdrawal of 139 billion cubic feet of the fuel from storage last week, in line with analyst estimates.

Price action

• April West Texas Intermediate crude rose $7.69, or 8%, to settle at $103.41 a barrel on the New York Mercantile Exchange after hitting an intraday high at $106.78. The settlement was the highest for a front-month contract since July 22, 2014, according to Dow Jones Market Data.
• May Brent crude, the global benchmark, added $7, or 7.2%, to close at $104.97 a barrel on ICE Futures Europe, the highest finish since Aug. 8, 2014.
• April natural gas settled at $4.573 per million British thermal units, up 3.9%.
• April gasoline added 5.3% to $3.089 a gallon. April heating oil rose 7.5% to $3.151 a gallon, the highest finish since February 2014.

Market drivers

The biggest impact of the IEA’s oil reserve release is “on market sentiment, given the delay and staggered nature between an announcement and the barrels hitting the physical market,” said Matt Smith, lead oil analyst, Americas, at Kpler. On Tuesday, the IEA announced an agreement for the release of 60 million barrels from member reserve.

Meanwhile, OPEC+ — the Organization of the Petroleum Exporting Countries and its allies, including Russia — will meet Wednesday to decide on production levels for April. The group is likely to “stay the course with the current easing schedule,” analysts at RBC Capital Markets wrote in a note dated Monday. OPEC+ has stuck to a plan to raise production by 400,000 barrels per day. Still, the RBC Capital Markets analysts said they “do not entirely rule out that there could be a strategy shift in the coming weeks, if there is an actual physical supply disruption or the Ukraine conflict devolves in such a way that the current OPEC+ partnership model becomes untenable.”

Meanwhile, shelling by Russian forces continued to pound civilian targets in Kharkiv, Ukraine’s second-largest city, on Tuesday, according to news reports, as satellite images showed a 40-mile convoy of Russian tanks and other military vehicles advancing on Kyiv, the capital. Russia’s Defense Ministry said it would target intelligence and communications targets in Kyiv,; Russian forces hit the capital’s TV tower, while news reports said Moscow was shifting to a strategy of pounding civilian areas in an effort to demoralize Ukrainian resistance.

Western nations over the weekend and on Monday put additional sanctions on Moscow, blocking selected Russian banks from the SWIFT interbank messaging system and taking aim at the country’s central bank in an effort to impede its ability to access foreign-exchange reserves. The moves, however, were designed to exempt energy flows from Russia, a major producer of oil and natural gas. But analysts said the sanctions appeared to also undercut demand for Russian commodities.

Commodities consumers are increasingly reluctant “to buy oil, liquefied natural gas, coal, metals and grains from Russia due to the uncertain legal situation,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note. “The fact that several Russian banks have been excluded from the international SWIFT payment system makes paying for deliveries more difficult. Furthermore, Western banks are refusing to finance the transactions,” he wrote.

Members of the International Energy Agency, a Paris-based group whose members include most industrialized nations, could agree as early as Monday or Tuesday to tap their national strategic oil reserves, the report said, citing European and Persian Gulf officials. The Journal reported it would include 40 million barrels from the U.S. Oil prices had jumped after the U.S., the European Union and the U.K. over the weekend said they would block some Russian banks from the SWIFT messaging system, a move that makes it more difficult for countries to purchase Russian oil. “Geopolitical risks will remain high for some time,” Matthew Parry, head of long-term analysis at Energy Aspects, recently told MarketWatch. “Western sanctions are expanding as the conflict widens.” Parry expects the Brent price to average $101 this year.

The U.S. Treasury on Monday said it’s prohibiting any transactions with the Central Bank of the Russian Federation, as well as Russia’s national wealth fund and the Russian Ministry of Finance. The “hurdles that these sanctions will create for financial payments are likely to exacerbate the recent Russian commodity supply shock, already visible as Western and Chinese traders halting shipments,” said analysts at Goldman Sachs. The Goldman analysts hiked their one-month Brent price forecast to $115 from $95, arguing there would need to be up to 4 million barrels of demand destruction to offset the loss of Russian exports.

The Organization of the Petroleum Exporting Countries could respond, the analysts added. “While such an outcome becomes increasingly likely the more Russia is ostracized from the global economy, driving core-OPEC, Iran and the West closer together, it would nonetheless come at the expense of a complete depletion of the global oil market’s spare capacity, still warranting much higher oil prices,” they said. OPEC and its allies, together known as OPEC+, will meet Wednesday to make a decision on April oil production levels.

In other news, BP said it would exit its stake in Rosneft, taking a $25 billion write-down, as Equinor also said it would end its Russian ventures.