Oil rises 1% as U.S. crude oil decline overshadows OPEC+ push

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Oil prices fell earlier on Thursday as Saudi Arabia and other OPEC+ states agreed to bring forward oil production increases to compensate for Russian production losses to mitigate the surge in oil prices and inflation and pave the way for an ice-breaking visit to Riyadh by US President Joe Biden.

Oil rose more than 1% on Thursday after U.S. crude inventories fell more than expected amid strong fuel demand, skipping an OPEC+ deal to boost crude output to offset a decline of Russian production.

The prices were also supported by the European Union’s sixth set of sanctions against Russia, which will include an immediate ban on new insurance contracts for ships carrying Russian oil and a six-month phase-out of existing contracts.

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Brent crude futures were up $1.32, or 1.1%, at $117.61 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.61, or 1.4%, to $116.87.

U.S. crude oil and fuel inventories fell last week as demand continued to outstrip supply, with commercial crude inventories falling even as more strategic reserves entered the market, government data shows. .

U.S. crude oil inventories fell 5.1 million barrels, as analysts expected a drop of 1.3 million barrels in a Reuters poll.

Oil prices fell earlier on Thursday as Saudi Arabia and other OPEC+ states agreed to bring forward oil production increases to compensate for Russian production losses to mitigate the surge in oil prices and inflation and pave the way for an ice-breaking visit to Riyadh by US President Joe Biden.

The Organization of the Petroleum Exporting Countries and its allies, including Russia, known as OPEC+, have agreed to increase production by around 650,000 barrels per day over the next two months instead of the 432,000 current bpd.

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“While OPEC+ agreed to increase its production quota by a little more than the market expected, in reality it is doing very little to add additional supplies because OPEC+ was already below its existing quotas. over 2 million barrels per day,” said Andrew Lipow. , president of Lipow Oil Associates in Houston.

Oil was mostly up for several weeks as Russian exports were squeezed by US and European sanctions against Moscow following its February 24 invasion of Ukraine, an action Moscow calls a “special military operation”.

The market was also supported by China’s gradual emergence from strict COVID-19 lockdowns.

Russian production fell by around 1 million bpd following the sanctions.

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An OPEC+ source familiar with Russia’s stance said Moscow might agree to other producers ramping up production to make up for its lower production, but not necessarily to make up the entire shortfall.

The Kremlin says it can redirect oil exports to minimize losses from EU sanctions, but analysts remain skeptical.

“The extent to which this will prove feasible is, however, questionable. Russian oil production is therefore likely to fall further in the coming months,” said Commerzbank analyst Carsten Fritsch, who also questioned the ability of OPEC+ to add considerably more oil to the market.

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