Oil prices fell on Thursday following reports that OPEC could start pumping more crude to offset a drop in Russian production caused by Western sanctions.
The Wall Street Journal reported on Tuesday that some members of the oil-exporting cartel are exploring the idea of suspending the OPEC+ supply deal with Russia. That would allow countries like Saudi Arabia and the United Arab Emirates to step in and ease a supply crunch that pushed global crude prices above $120 a barrel this week.
Saudi Arabia, the de facto leader of OPEC, had indicated to Western allies that it was ready to increase its oil production if Russian production fell significantly following sanctions imposed following the invasion of Ukraine. in February, the Financial Times reported. A deal could be reached as early as Thursday at a meeting of OPEC and Russian energy ministers, according to Reuters.
Saudi Arabia had previously rejected U.S. requests to increase production beyond a long-standing quota agreed with Russia and other non-OPEC producers. But fears that sky-high prices could tip the world into recession seem to prompt a rethink.
Brent crude, the world’s benchmark oil, hit $125 a barrel on Tuesday, its highest level since early March. US oil WTI nearly hit $120 a barrel. Both have since fallen in response to media reports, with Brent plunging another 2.3% below $114 and WTI down 1.9% to $113 as of 5 a.m. ET.
“[The] The OPEC+ meeting later today could be crucial if Russia receives a waiver from its production quotas, which would allow the two main swing producers, Saudi Arabia and the United Arab Emirates, to increase exports to fill the void,” noted Jeffrey Halley, senior market analyst for Asia-Pacific at Oanda.
“None of this will alleviate the refining bottleneck/crisis that is driving up gasoline and diesel prices around the world, but it would be rare good news for the global economy and the fight against the crisis. ‘inflation,’ he added.
Russia’s invasion of Ukraine prompted Western powers to ban imports of Russian crude and refined products. Earlier this week, the European Union agreed to ban 90% of Russian oil by the end of this year.
At the same time, Russia began to choke off natural gas exports to some EU countries, adding to the energy supply crisis that has helped send US and European inflation to its highest level since. decades and gasoline and diesel prices all the time. tops.
Reuters, citing two OPEC+ sources, reported on Thursday that Russian oil production had fallen by around 1 million barrels a day in recent months as a result of Western sanctions.