Oil prices rise as Russia-Ukraine war threatens supply disruption

By Nicole Jao

NEW YORK (Reuters) -Oil prices climbed around 2% on Monday, continuing last week's gains, as traders anticipated more U.S. sanctions on Russian oil and Ukrainian attacks on Russian energy infrastructure that could disrupt supplies.

Brent crude futures settled up $1.07, or 1.58%, at $68.80, while West Texas Intermediate crude futures gained $1.14, or 1.79%, to $64.80.

The U.S. is trying to broker a peace deal between Ukraine and Russia to bring an end to the 3-1/2-year war.

"There seems to be a sense the peace talks are dragging on," said Phil Flynn, senior analyst with the Price Futures Group. "There could be sanctions on Russia if these talks don't go well." 

U.S. President Donald Trump said again on Friday that he would impose sanctions on Russia if there was no progress toward a peaceful settlement in Ukraine in two weeks.

He has also said he may hit India with harsh tariffs over its purchases of Russian oil. 

Over the weekend, U.S. Vice President JD Vance said Russia had made "significant concessions" toward a negotiated settlement in the war.

Ukraine, which has stepped up attacks on Russian energy infrastructure, launched a drone attack on Sunday that caused a huge blaze at the Ust-Luga fuel export terminal, Russian officials said.

A fire at Russia's Novoshakhtinsk refinery, following a Ukrainian drone attack, burned for a fourth day on Sunday, the region's acting governor said.

The refinery sells fuel mainly for export and has an annual capacity of 5 million metric tons of oil, or about 100,000 barrels per day.

The market impact of possible Russian supply disruptions was offset by OPEC+'s reversal of a series of production cuts, which is adding millions of barrels to the market, said Ole Hansen, head of commodity strategy at Saxo Bank.

Eight members of the oil exporters' group are scheduled to meet on September 7, when they are set to approve another boost.

Investors' risk appetite increased after Federal Reserve Chair Jerome Powell on Friday signalled a possible interest rate cut at the U.S. central bank's meeting in September. 

Both oil benchmarks, however, appear to lack momentum, said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova, adding that markets seem increasingly convinced that Trump's tariffs will hit economic growth, which would limit fuel demand.

(Reporting by Anna Hirtenstein in London;Additional reporting by Sam Li in Beijing and Florence Tan in Singapore; Editing by Paul Simao, Barbara Lewis and Nia Williams)