Oil prices fell to trade near US$113 a barrel following a report that Saudi Arabia is ready to pump more oil if Russian output declined substantially due to increasing sanctions over its invasion of Ukraine.
West Texas Intermediate futures dropped more than 3 percent in Asian trading before paring some of those losses.
The Financial Times reported that Saudi Arabia indicated to Western allies that it is prepared to increase oil supply.
Photo: Reuters
The news came ahead of a monthly OPEC+ meeting yesterday at which the group was expected to ratify a modest increase in output for next month.
The US has repeatedly called for the cartel to increase production faster to deal with surging gasoline prices and the hottest inflation in decades, which has been fanned by the war in Ukraine.
US President Joe Biden is likely to visit Saudi Arabia later this month as part of an international trip that would include NATO and G7 meetings, people familiar with the matter said.
There have been talks about an immediate supply boost from Saudi Arabia and the United Arab Emirates, which could be announced at the OPEC+ gathering, although nothing has been finalized, the Financial Times said.
Output increases scheduled for September might be brought forward to next month and August, the newspaper said.
The Wall Street Journal this week also reported that some OPEC members were discussing exempting Russia from the oil production agreement.
“The downward trajectory for oil boils down to just how deep OPEC is willing to dip into its spare capacity without entirely turning their back on Russia,” said Stephen Innes, a managing partner at SPI Asset Management. “A shift in strategy, even a slow drip response, brings a new downside risk for oil.”
If Saudi Arabia does pump more, it would be an abrupt turnaround from its current stance. The Saudi Arabian Ministry of Foreign Affairs last week said that there was nothing more it could do to tame oil markets, adding that there was no shortfall of crude.
OPEC+ is expected to rubber-stamp a production increase of 430,000 barrels a day for next month, although the alliance has struggled to meet its modest supply increase targets in the past few months.
Oil prices capped a sixth monthly advance last month, the best winning streak since early 2011, as tightening markets because of the war in Ukraine coincided with a recovery in demand as countries threw off COVID-19 restrictions.
EU efforts to approve a partial ban on Russian oil imports hit an obstacle after Hungary raised new or previously rejected demands.
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