Oil prices rose on Wednesday, paring early losses, as the threat of new sanctions on Russia raised supply concerns, countering fears of weaker demand following a build in US crude stockpiles and China's extended lockdown.
After losing nearly 1 per cent in the previous session on a strong dollar, a build-up in the US crude stockpile, and Shanghai's extended lockdown fuelled fears of slower demand; the benchmark Brent crude was last up more than $1 at nearly $108 a barrel.
On Tuesday, the dollar hit its highest in nearly two years, boosted by hawkish comments from Federal Reserve officials who pushed for a quick reduction in the central bank's bloated balance sheet.
A stronger dollar makes oil more expensive for holders of other currencies, so international oil prices move inversely to the greenback trend.
Demand worries also mounted after top oil importer China authorities extended a lockdown in Shanghai to cover all of the financial centre's 26 million people.
Wild gyrations were expected to be the norm, mainly driven by the newsflow from the Russia-Ukraine conflict.
"We expect crude oil prices to remain volatile to negative in today's session," said Rahul Kalantri, Vice President for Commodities at Mehta Equities.
US West Texas Intermediate futures climbed to above $103 a barrel. The contract fell 1 per cent on Tuesday as US crude, and distillate stocks rose last week while gasoline inventories dipped, according to market sources citing American Petroleum Institute figures on Tuesday.
That rise in crude prices was primarily driven by the prospects of new sanctions on Moscow over civilian killings in northern Ukraine, which President Volodymyr Zelensky described as "war crimes," while Russia denied targeting civilians.
The proposed European Union (EU) sanctions, which the bloc's 27 member states must approve, would ban buying Russian coal and prevent Russian ships from entering EU ports.
Britain also urged the Group of Seven and NATO nations to agree on a timetable to phase out oil and gas imports from Russia.
Meanwhile, member states of the International Energy Agency (IEA) were still discussing how much oil they would release from storage to cool markets, sources told Reuters, adding that an announcement was expected in the coming days.