Volatile oil market weighs OPEC filling Russia supply gap

Global oil prices were in choppy waters on Thursday, as Brent crude futures gained momentum after falling from 14-year highs in the previous session over supply worries due to sanctions on Russia, and the UAE energy minister confirmed the Gulf state’s commitment to OPEC+ monthly production increases.

Brent crude futures were up $2.53, or 2.28 percent, at $113.67 a barrel at 0651 GMT after trading in about a $5 range. The benchmark contract slumped 13 percent in the previous session in its biggest one-day drop in nearly two years. West Texas Intermediate (WTI), the gauge that tracks US crude, retreated 12.5 per cent to $109.60 a barrel at the close of the previous session, and was up $1.64, or 1.51 percent, at $110.34 a barrel, after trading in a $4 range.

Late on Wednesday, the UAE Minister of Energy and Infrastructure Suhail Al Mazrouei said the country was committed to the existing production agreement by the 23-member OPEC+ led by Saudi Arabia and Russia.

“The UAE believes in the value OPEC+ brings to the oil market. The UAE is committed to the OPEC+ agreement and its existing monthly production adjustment mechanism,” Al Mazrouei wrote on Twitter.

The current mechanism allows for ramping up oil supply by 400,000 barrels per day in monthly increments, and group has worked to bring back nearly 6 million barrels per day in production cuts to restore drastically reduced supply since the onset of pandemic in 2020.

Earlier on Wednesday, the UAE’s Ambassador to the US, Yousef Al Otaiba, said in a statement published on the UAE Embassy website that the Gulf producer “favors production increases and will be encouraging OPEC to consider higher production levels”.

“The UAE has been a reliable and responsible supplier of energy to global markets for more than 50 years and believes that stability in energy markets is critical to the global economy,” Al Otaiba said.

According to analysts, the oil market is in a wait-and-watch mode to gain clarity on whether major producers would boost supply to help plug the gap in output from Russia. Uncertainty over the supply constraints has led to wide-ranging forecasts for oil prices between $100 and $200 a barrel.

“To suggest the oil market is confused would be an understatement as we are in an unprecedented situation,” Stephen Innes, managing partner at SPI Asset Management, told Reuters in a statement.

OPEC+ is scheduled to meet on March 31 to decide on May output levels and agreed in a March 2 meeting to maintain the uptick in production quotas for April. OPEC Secretary-General Mohammed Barkindo told reporters earlier this week that the group was planning to “stay the course” on its production policy.