After a month of rallying in response to the Russia-Ukraine conflict, oil prices have finally cooled at the combined news of Ukraine withdrawing its NATO application; and the UAE saying that it will increase oil production while encouraging its allies in the Organization of the Petroleum Exporting Countries (OPEC) to do the same.
The former piece of news comes as Ukrainian President Volodymyr Zelensky announced that he has “cooled down” on the issue after “understanding that NATO was not prepared to accept Ukraine”. Ukraine joining the military alliance was one of the stated reasons for the Russian invasion.
Meanwhile, the UAE has said that it wants to increase oil production, and would encourage allied producers in OPEC to do the same. This brings a likely additional source of oil from both the UAE and Saudi Arabia, both of which have spare production capacity. In addition, the US is also hoping to reconsider sanctions on other oil-producing countries including Iran and Venezuela.
Oil prices sunk at the news, with Brent dropping 13% to $111 and WTI tumbling over 12% to $109. Both sunk from record highs that were hit just earlier this week.
This comes even as bullish crude oil inventory data (a decrease of 1.863M versus the forecasted0.657M) from the EIA gave crude a boost earlier on Wednesday. This implies that even though demand for crude has increased, the market’s greater concern still lies with global supply
“That $130 price point was factoring in the absolute siege mentality in the oil market, where we were staring down potentially losing all Russian output, OPEC not budging and the Ukraine situation just worsening,” said John Kilduff, partner at Again Capital
Combined, just the UAE and Saudi Arabia have a spare crude production capacity of roughly 3 million barrels per day, covering roughly a third of Russia’s 10 million bpd production.
“The UAE is essentially saying to Saudi Arabia and Kuwait, ‘Let’s use our spare capacity so that Europeans no longer have to rely on Russia,'” said Andy Lipow, president of consulting firm Lipow Associates.
For now, stability seems to be the goal of producing nations, as Lipow adds that it is likely “OPEC leaders are remembering” how the world economy and oil prices crashed in 2008 just after crude hit $145 a barrel.
Investors are also advised to pay close attention to the upcoming US Core CPI data (MoM) for February, which will be released on Thursday, 10 March at 15:30 (GMT+2). As a friendly reminder, do keep an eye on market changes, control your positions, and manage your risk well.
Please note the Website is intended for individuals residing in jurisdictions where accessing the Website is permitted by law.
Please note that PU Prime and its affiliated entities are neither established nor operating in your home jurisdiction.
By clicking the "Acknowledge" button, you confirm that you are entering this website solely based on your initiative and not as a result of any specific marketing outreach. You wish to obtain information from this website which is provided on reverse solicitation in accordance with the laws of your home jurisdiction.
Thank You for Your Acknowledgement!
Ten en cuenta que el sitio web está destinado a personas que residen en jurisdicciones donde el acceso al sitio web está permitido por la ley.
Ten en cuenta que PU Prime y sus entidades afiliadas no están establecidas ni operan en tu jurisdicción de origen.
Al hacer clic en el botón "Aceptar", confirmas que estás ingresando a este sitio web por tu propia iniciativa y no como resultado de ningún esfuerzo de marketing específico. Deseas obtener información de este sitio web que se proporciona mediante solicitud inversa de acuerdo con las leyes de tu jurisdicción de origen.
Thank You for Your Acknowledgement!