By Mohi Narayan and Sonali Paul

(Reuters) – Oil prices rose on Thursday as concerns about supply due to a potential European Union (EU) ban on Russian oil came to the fore, days after diminished supplies from Libya rocked the market.

Brent crude futures rose $1.32, or 1.24%, to $108.12 a barrel at 0636 GMT. U.S. West Texas Intermediate (WTI) crude futures gained $1.26, or 1.23%, to 103.45 a barrel, adding to a 19 cent gain in the previous session.

Analysts said market volatility is likely to pick up again soon, with the EU still weighing a ban on Russian oil for its invasion of Ukraine, which Moscow calls a “special military operation”.

“EU discussions to ban or phase out Russian oil purchases, the biggest influence on crude prices in recent days, are on the back-burner but not settled yet, which may limit crude prices to a relatively narrow range on a daily settlement basis,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.

Libya, a member of OPEC, on Wednesday said the country was losing more than 550,000 barrels per day of oil output due to blockades at major fields and export terminals.

The demand outlook in China continues to weigh on the market, as the world’s biggest oil importer slowly eases strict COVID-19 curbs that have hit manufacturing activity and global supply chains.

The International Monetary Fund highlighted risks in China when it cut its forecast for global economic growth by nearly a full percentage point on Tuesday.

Meanwhile, the Caspian Pipeline Consortium’s Black Sea terminal could return to full capacity this week, Kazakh Energy Minister Bolat Akchulakov said on Wednesday.

“The resumption of CPC crude deliveries will be somewhat offset by continuing outages in Libya and the likelihood of more Russian crude getting locked out of market in face of an EU ban,” Hari said.

The oil market remains tight with the Organization of the Petroleum Exporting Countries and allies led by Russia, together called OPEC+, struggling to meet their production targets and with U.S. crude stockpiles down sharply in the week ended April 15. [EIA/S]

“I continue to expect that Brent will remain in a choppy $100.00 to $120.00 range, with WTI in a $95.00 to $115.00 range… A potential European oil embargo on Russia next week after French elections, could see a move towards the top of the range,” said Jeffrey Halley, analyst at OANDA.

(Reporting by Mohi Narayan in New Delhi and Sonali Paul in Melbourne; Editing by Jacqueline Wong and Himani Sarkar)