Crude oil prices fall, as OPEC hints at increased oil production
Story highlights
In 2020, the Organization of the Petroleum Exporting Countries+ decided to slash oil production, as global demand for oil reduced due to extended lockdowns. But recently, the Russia-Ukraine war and the following economic sanctions have again led to a need for increased oil production. OPEC is considering removing Russia from the grouping and increasing oil production.
Crude oil prices fell on Thursday following an expectation that Saudi Arabia may sharply increase oil production on demand by the United States, as sanctions on Russia, which is a major oil producer, have led to a diminished supply of oil in the global markets.
Brent crude was down $2.07, or 1.8%, at $114.22 a barrel at 0649 GMT, having risen 0.6% the previous day. U.S. West Texas Intermediate (WTI) crude dropped $2.21, or 1.9%, to $113.05 a barrel, after a 0.5% rise on Wednesday.
+ Oil prices skid $3 a barrel
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Analysts had expected Organization of the Petroleum Exporting Countries+ (OPEC+) producers to likely stick to their policy of only increasing output modestly, as they have done since May 2021.
But, The Wall Street Journal reported on Tuesday that some OPEC members were considering suspending Russia from the agreed production plan, to allow other producers to pump significantly more crude oil, as sought by the United States and European nations. The recent shuttle diplomacy between Saudi Arabia and Russia indicates the same.
"Russia has now transformed into a pariah," Seb analyst Bjarne Schieldrop commented, saying OPEC+ may break up or the agreed quota system will be placed on hold amid Moscow's international isolation.
"More oil from Saudi and the UAE will allow the West to implement sharper bans forcing Russian oil exports lower while not blowing up the oil price," Schieldrop added.
Stephen Brennock, an analyst at PVM Energy, said, "Such a move would effectively bring a premature end to the group's supply agreement and pave the way for an unrestricted increase in output,"
The 13 members of the Organization of the Petroleum Exporting Countries, chaired by Saudi Arabia, and their 10 partners, led by Russia, drastically slashed output in 2020 as demand slumped because of the coronavirus pandemic and worldwide lockdowns.
Recently, the soaring oil prices have stimulated the Gulf region's economies, with Saudi Arabia recording its highest growth rate in 10 years in the first quarter of 2022.
[With inputs from agencies]
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