Oil turmoil as market weighs on OPEC filling supply gap in Russia

The industrial plant of the PCK Raffinerie oil refinery is pictured in Schwedt / Oder, Germany, on March 8, 2022. The company receives crude oil from Russia via the “Filia” pipeline. REUTERS / Hannibal Hanschke

March 10, 2022

By Sonali Paul and Mohi Narayan

MELBOURNE (Reuters) – Oil prices rose on Thursday in volatile trade after falling sharply in the previous session as the market wondered if major producers would boost supply to help fill Russia’s production gap over sanctions. its invasion of Ukraine.

Brent crude futures were up $ 2.53, or 2.28%, at $ 113.67 a barrel at 06:51 GMT after trading at around $ 5. The benchmark contract fell 13% in the previous session, marking the biggest one-day drop in almost two years.

West Texas Intermediate (WTI) futures traded up $ 1.64, or 1.51%, to $ 110.34 a barrel after trading in the $ 4 area. The contract had fallen 12.5% ​​in the previous session, marking the biggest daily drop since November.

Uncertainty about where and when supply will come from to replace crude, the world’s second-largest exporter, Russia in a narrow market, has led to broad forecasts for oil prices between $ 100 and $ 200 a barrel. .

“Therefore, to suggest that the oil market is confused would be derogatory, as we are in an unprecedented situation,” said Stephen Innes, chief executive officer of SPI Asset Management.

The comments by the UAE Minister of Energy and the country’s ambassador to Washington sent conflicting messages.

UAE Energy Minister Suhail al-Mazrouei said on Twitter late Wednesday that his country was committed to an existing agreement between the Organization of the Petroleum Exporting Countries and its allies, including Russia, also known as OPEC +, to increase supply. 400,000 barrels per day per month. sharp cuts in 2020.

Hours earlier, prices plummeted following remarks by the UAE ambassador to Washington that his country would encourage OPEC to consider higher output to fill the supply gap due to sanctions on Russia following its invasion of Ukraine. Russia calls its invasion a “special operation” to disarm its neighbor.

Comments from UAE officials came as the market also took note of US moves to ease sanctions on Venezuelan oil and efforts to sign a nuclear deal with Tehran that could lead to more oil supplies than Iran later this year.

The talks scheduled for Thursday between the foreign ministers of Russia and Ukraine in Turkey also gave the market a reason to pause.

While the UAE and Saudi Arabia have surplus capacity, some other OPEC + producers are finding it difficult to meet their production targets due to insufficient investment in infrastructure in recent years, which will limit their ability to further increase production.

“We believe it will be difficult for OPEC + to boost production in this environment,” said Commonwealth Bank commodity analyst Vivek Dhar.

Meanwhile, U.S. crude oil and fuel stocks fell last week, raising concerns about already limited global supplies.

Crude stockpiles fell 1.9 million barrels a week through March 4 to 411.6 million barrels, compared with analysts’ expectations in a Reuters poll of 657,000 barrels.

US crude reserves in the Strategic Petroleum Reserve fell to 577.5 million barrels, the lowest since July 2002.

(Report by Sonali Paul · Edited by Shri Navaratnam, Shivani Singh and Tom Hogue)

Oil turmoil as market weighs on OPEC filling supply gap in Russia

Source link Oil turmoil as market weighs on OPEC filling supply gap in Russia

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