Oil rebounds as tight supply gives high floor to prices

The industrial facilities of the PCK Raffinerie oil refinery are pictured in Schwedt/Oder, Germany, March 8, 2022. The company receives crude oil from Russia via the ‘Friendship’ pipeline. REUTERS/Hannibal Hanschke

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  • Oil surges in volatile market
  • UAE officials have differing views on exit plans
  • U.S. crude oil and fuel inventories fell last week

LONDON, March 10 (Reuters) – Oil prices rebounded on Thursday after a sharp decline in the previous session after the United Arab Emirates backtracked on statements that OPEC and its allies could increase production to help close the Russian export gap.

In a volatile market, Brent crude futures were up $4.90, or 4.4%, at $116.04 a barrel as of 1428 GMT after trading within the $8 range. The benchmark contract fell 13% in the previous session, its biggest daily percentage decline in around two years.

U.S. West Texas Intermediate (WTI) crude futures rose $3.71, or 3.4%, to $112.41 after trading within the $7 range. The contract had fallen 12% in the previous session in the biggest daily decline since November.

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PVM oil market analyst Tamas Varga called Wednesday’s fall a “temporary correction”.

Uncertainty over where the supply to replace Russian crude will come from – and when – has led to wide-ranging forecasts for oil prices up to $200 a barrel.

As oil from the world’s second largest exporter is shunned over its invasion of Ukraine, comments from officials in the United Arab Emirates (UAE) have sent mixed signals.

Energy Minister Suhail al-Mazrouei said on Twitter that the UAE was committed to an agreement between the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia to increase oil supply of just 400,000 barrels per day (bpd) each month after deep cuts. in 2020. find out more

Just hours earlier, prices fell after the UAE’s ambassador to Washington said his country would encourage OPEC to consider higher production to fill the supply gap created by Russia sanctions. following his invasion of Ukraine. Russia describes its incursion as a “special operation”. Read more

While the United Arab Emirates and Saudi Arabia have spare capacity, some other producers in the OPEC+ alliance are struggling to meet production targets due to underinvestment in infrastructure in recent years.

Talks scheduled for Thursday between the foreign ministers of Russia and Ukraine in Turkey also gave the market reason to pause.

The market also priced in moves by the United States to ease sanctions on Venezuelan oil and efforts to strike a nuclear deal with Tehran, which could lead to an increase in oil supply. Read more

Additional supply could also come from the release of stocks coordinated by the International Energy Agency and growing production from the United States. Read more

“With a bit of goodwill, coordination and luck, supply shock can be greatly mitigated but probably not neutralized,” Varga said.

Meanwhile, U.S. crude oil and fuel inventories fell last week, adding to concerns about already tight global supplies.

Crude inventories fell 1.9 million barrels in the week of March 4 to 411.6 million barrels. U.S. crude inventories in the Strategic Petroleum Reserve fell to 577.5 million barrels, the lowest since July 2002.

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Reporting by Shadia Nasralla Additional reporting by Sonali Paul and Mohi Narayan Editing by David Goodman and Mark Potter

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