Oil prices drop ahead of OPEC+ meeting on report Saudis will make up for any lost Russian supply
Oil prices fell on Thursday ahead of an OPEC+ meeting, after a report surfaced that Saudi Arabia was prepared to pump more oil to compensate for any Russian output loss.
Price action
- West Texas Intermediate crude for July delivery CL.1,
-2.09% CLN22,-2.09% fell $2.34, or 2.6%, to $112.57 a barrel. Oil finished 0.4% higher at $114.67 a barrel on Nymex on Wednesday. - July Brent crude BRNN22 dropped $2.85, or 3.3%, to $112.99 a barrel on ICE Futures Europe. Brent finished 1% higher at $122.84 a barrel on Wednesday.
- June gasoline RBM22 fell 1.5% to $4.008 a gallon, while June heating oil HOM22 fell 2.2% to $4.055 a gallon.
- July natural gas rose NGN22,
+0.86% 0.6% to $8.749 per million British thermal units, after tumbling 6.7% on Wednesday.
Market drivers
Oil prices were sliding after the Financial Times reported that Saudi Arabia has told Western allies that it will raise production if it becomes apparent that global supply is facing a big drop in Russian output due to sanctions over its invasion of Ukraine. Citing five persons with knowledge of the matter, the report said those concerns have increased since the EU recently imposing a ban on Russian oil by sea.
The sources said that Saudi Arabia sees a tight market, but no major shortages for now, though a ramping up of China’s economy as it recovers from the latest COVID outbreak could pressure supplies further. Easing lockdowns in China’s biggest cities have provided support for oil prices recently.
Saudi Arabia has repeatedly resisted U.S. calls to increase supply and ease pressures on soaring gas prices.
Fresh speculation over Saudi Arabia’s thoughts on oil supply come as traders prepare for a Thursday meeting of the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+. Hitting oil prices earlier this week was a report in The Wall Street Journal that the group was considering exempting Russia from its production targets.
Separately, the Associated Press reported that President Joe Biden was considering a face-to-face meeting with de facto Saudi ruler Prince Mohammed bin Salman. Biden denounced the Saudi royal family in 2019 after the 2018 killing and dismemberment of U.S.-based journalist Jamal Khashoggi,
Read: Will OPEC+ fill the gap as Russian oil output falls? Don’t count on it.
Investors will also be keeping an eye on U.S. supply data from the Energy Information Administration, scheduled for release at 11 a.m. Eastern Time. The report was delayed by a day due to Monday’s Memorial Day holiday.
Analysts and traders surveyed by The Wall Street Journal estimate U.S. oil inventories declined by 500,000 barrels for the week ended May 27. Gasoline stockpiles are expected to decrease by 100,000 barrels from the previous week, while distillate inventories are expected to rise by 800,000 barrels.
The American Petroleum Institute, an industry group, said late Wednesday that its weekly data showed a 1.2-million-barrel drop in crude supplies, a 256,000-barrel fall in gasoline stocks and an 858,000-barrel increase in distillate inventories, according to a source.
