NEW YORK: Oil prices plunged over 17% on Wednesday after the United Arab Emirates said the OPEC member would support boosting supply into a market in disarray because of supply disruptions caused by sanctions imposed on Russia after it invaded Ukraine.
Brent crude fell more than 17%, or $22, during a sharp selloff before recovering some of it to trade down $17.16, or 13.4%, at $110.82 a barrel at 2:02 p.m. ET (1902 GMT). US crude was down $15.44, or 12.5%, at $108.26.
“We favor production increases and will be encouraging OPEC to consider higher production levels,” Ambassador Yousuf Al Otaiba said in a statement tweeted by the UAE Embassy in Washington.
“That’s not nothing. They can probably bring about 800,000 barrels to the market very quickly, even immediately, bringing us one-seventh of the way there in replacing Russian supply,” said Bob Yawner, director of energy futures at Mizuho.
Traders also cited reports that fellow OPEC member Iraq’s oil minister said it could boost oil output if required by the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+.
Reuters could not immediately verify the accuracy of the report.
OPEC’s language shifted this week when the group’s Secretary General Mohammed Bark indo said that supply was begging to lag demand.
Just a week ago, OPEC+ blamed the run up in prices on geopolitics rather than any lack of supply and decided against increasing output any faster than it already was. The group has been targeting an increase in output of 400,000 bpd every month, and has resisted demands from the United States and other consuming countries to pump more.
Oil prices had already fallen earlier in the session after the International Energy Agency said oil reserves could be tapped further to compensate for disruption to Russian supplies.
“If there’s a need, if our governments decide so, we can bring more oil to the markets, as one part of the response,” said EIA chief Faith Birol.
Birol said the EIA decision last week to release 60 million barrels of oil from strategic reserves was “an initial response.” His remarks echo words from US State Department Senior Advisor Amos Rothstein at an industry conference on Tuesday, who also suggested more releases could be coming.
The market had rallied over 30% since Russia invaded Ukraine on Feb. 24, touching a peak over $139 a barrel on Monday. The US banned oil and gas imports from Russia on Tuesday, which added to disruption in exports caused by a raft of punitive economic sanctions imposed on Russia by governments worldwide after the invasion.
Britain said on Tuesday it would phase Russian imports out, however, and numerous buyers have stopped buying Russian crude. JP Morgan estimated around 70% of Russian sea-borne oil was struggling to find buyers.
Russia exports around 7 million barrels per day of crude and fuel, around 7% of global supplies.
Another potential source of extra oil supply is Iran, which has been in talks with Western powers for months on resuming its 2015 nuclear deal, abandoned by then-US President Donald Trump in 2018. Iran’s chief negotiator in the Vienna talks returned to the Austrian capital on Wednesday.
US crude and fuel inventories fell last week, while stocks in the Strategic Petroleum Reserve fell further to their lowest since July 2002.
The Relative Strength Index for Brent, a momentum indicator, suggested the market was due for a selloff.
“There was definitely room for a little bit of a cool down here,” Yawner said. “At these levels, you were going to run out of buyers.
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