Oil futures rose early on Tuesday, reversing sharp losses from the prior day, as the market weighed the potential for more sanctions on Russia's energy sector and OPEC warned it would be impossible to increase output enough to offset lost supply.
Brent crude futures were up 85 cents, 0.9%, to $99.33 a barrel, and US West Texas Intermediate contracts were up $1.04, or 1.1%, to $95.33 a barrel at 0019 GMT.
Both contracts had settled down around 4% on Monday amid concerns that coronavirus lockdowns in China would dampen demand for fuel and ahead of a massive oil reserve release by International Energy Agency (IEA) members.
The European Union is drafting proposals for an EU oil embargo on Russia in the wake of its invasion of Ukraine, some foreign ministers said on Monday. However, there is currently no agreement among members on crude from Russia, which calls its actions in Ukraine a "special operation".
"The oil market is still vulnerable to a major shock if Russian energy is sanctioned, and that risk remains on the table," wrote Edward Moya, a senior market analyst with OANDA.
"Oil prices will play tug-of-war here as crude inventories remain low, but energy traders will struggle to shake-off these steady announcements of new COVID restrictions in China," he added.
Tuesday's rise in oil markets also followed a warning from the Organization of the Petroleum Exporting Countries (OPEC) that some 7 million barrels per day of Russian oil and other liquids exports could be lost due to sanctions or voluntary actions, and that it would be impossible to replace those volumes.
IEA member nations are planning to release some 240 million barrels over the next six months in a bid to calm volatile oil markets, of which 180 million will be released from US stockpiles at a rate of 1 million bpd starting in May.