Crude oil prices rise as major producers warn of production capacity limits

Oil closed higher for the third day in a row on Tuesday, as major producers, including Saudi Arabia and the United Arab Emirates, seemed unlikely to increase production significantly, while Western governments agreed to explore ways to reduce the price of Russian crude.

Brent crude LCOc1 rose $2.89, or 2.5 percent, to $117.58, after rising 1.7 percent the previous day. US West Texas Intermediate (CLc1) crude futures increased $2.19, or 2%, to $111.76, after rising 1.8% on Monday.

Leaders of the Group of Seven wealthy nations have said they will explore a shipping ban on Russian crude that has been sold above a certain price, as they seek to increase pressure on Moscow over its invasion of Ukraine.

The International Energy Agency said in its June report that Russian oil export earnings rose in May even as volumes declined.

Western sanctions on Russia and its oil and gas production have caused global energy prices to rise sharply in recent months. However, other major producers have yet to implement a major pumping push.

Saudi Arabia and the United Arab Emirates are seen as the only two countries in the Organization of the Petroleum Exporting Countries (OPEC) with spare capacity to make up for lost Russian supplies and weak production from other members.

Tobin Gorey, an analyst at Commonwealth Bank Commodities, said in a note.

Analysts also said political turmoil in Ecuador and Libya could further cut supplies.

The shortage caused prices to rebound this week, offsetting fears of a recession that has weighed on prices over the past two weeks.