Oil prices plunged as much as 17% after media reports said OPEC producers United Arab Emirates and Iraq would support increased production, potentially offsetting some of the supply disruptions caused by sanctions on Russian oil after its invasion of Ukraine.
Brent crude fell more than 17%, or $22, to hit a session low at $105.60 during a sharp selloff. The benchmark crude recovered some losses by 1:03 PM EST (1803 GMT) to trade down $13.29, or 10.4%, at $114.69 a barrel. US crude was down $12.01, or 9.7%, at $111.69.
Prices hit session lows after traders cited media reports of an Iraqi minister claiming the country is ready to hike production if OPEC+ requires it to. Reuters could not immediately verify the accuracy of the report.
Financial Times had earlier reported that Yousef al-Otaiba, the UAE’s ambassador to Washington, said the country favours increasing production.
“That is not nothing. They can probably bring about 800,000 barrels to the market very quickly, even immediately, bringing us one-seventh of the way there in replacing Russian supply,” said Bob Yawger, director of energy futures at Mizuho.
US President Joe Biden on Tuesday imposed an immediate ban on Russian oil, but major European nations did not join in, largely because those nations are more dependent on Russian oil.
Britain said on Tuesday it would phase Russian imports out, however, and numerous buyers have stopped buying Russian crude. JP Morgan estimated around 70% of Russian seaborne oil was struggling to find buyers.
The United States imported more than 20.4 million barrels of crude and refined products a month on average from Russia in 2021, about 8% of US liquid fuel imports, according to the Energy Information Administration.
“Theoretically, the US could even offset the outages from Russia with its own production,” Carsten Fritsch of Commerzbank wrote in a report.
The head of the International Energy Agency said its decision last week to release 60 million barrels of oil from strategic reserves as “an initial response.”
“If there’s a need, if our governments decide so, we can bring more oil to the markets, as one part of the response,” said Fatih Birol, head of the IEA.
Published in The Express Tribune, March 10th, 2022.
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