Oil turns negative as OPEC considers suspending Russia from production deal

FILE PHOTO – Models of oil barrels and a pump jack are shown in front of a rising stock chart and “$100” in this illustration taken February 24, 2022. REUTERS/Dado Ruvic/Illustration

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  • Gulf producers could increase production if Russia is suspended from OPEC+ – WSJ
  • Benchmark indices up at the end of May, increase by more than 70% in six months
  • EU gradually bans Russian oil imports by sea

HOUSTON, May 31 (Reuters) – Oil prices turned negative on Tuesday after a report that some producers were exploring the idea of ​​suspending Russia’s participation in the OPEC+ production deal.

Although there was no formal pressure for the Organization of the Petroleum Exporting Countries to pump more oil to make up for any potential shortfall from Russia, some Gulf members had begun planning increased production during coming months, the Wall Street Journal reported, citing OPEC delegates.

Brent crude futures for August, the most actively traded contract, stabilized at $2, or 1.7%, at $115.60 a barrel, after hitting $120.80 earlier in the month. daytime. The July 1 contract, which expired on Tuesday, closed up $1.17, or 1%, at $122.84.

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U.S. West Texas Intermediate (WTI) crude stood at $114.67 a barrel, down 40 cents or 0.4% from Friday’s close. Earlier in the session, it had touched $119.98, its highest level since March 9. There was no settlement on the US Memorial Day holiday.

“Russia’s suspension from OPEC plus could be a precursor for Saudi Arabia and the United Arab Emirates to use their spare production capacity, as they would feel like they no longer had an agreement on quotas. production that must recognize Russia’s interests,” said Andrew Lipow. of Lipow Oil Associates in Houston.

OPEC and its Russian-led allies, known collectively as OPEC+, reversed record production cuts in place since the COVID-19 pandemic took hold in 2020. Under a Agreement reached in July last year, the group was to increase production targets by 432,000 barrels per day every month until the end of September.

However, Russian crude production in April fell almost 9% from the previous month, according to an internal OPEC+ report this month. Read more

Despite the late reversal in direction during the session, both benchmarks ended May higher, marking the sixth consecutive month of gains. They increased by more than 70% over the period.

The premium for August-loaded Brent contracts on a six-month spread hit a nine-week high near $15 a barrel, indicating the current tightness in supply.

Prices were supported for most of the session after the European Union agreed to a partial and phased ban on Russian oil, China decided to lift some COVID-19 related restrictions and the summer driving season in the United States began.

EU leaders have agreed in principle to cut oil imports from Russia by 90%, the bloc’s toughest sanction to date against Moscow since the invasion of Ukraine three months ago. Read more

Once fully enacted, the sanctions on crude will be staggered over six months and on refined products over eight months. The embargo exempts pipeline oil from Russia as a concession to Hungary.

U.S. crude oil production rose more than 3% in March to 11.7 million bpd, its highest level since November, the government said. However, production has been slow to recover from the impact of the coronavirus pandemic and is still well below its all-time high of 12.3 million bpd in 2019. read more

Oil prices found further support as Shanghai announced the end of its COVID-19 lockdown and will allow residents of China’s largest city to leave their homes and drive their cars from Wednesday. Read more

U.S. retail gasoline prices also hit a record national average of $4.622 a gallon, according to AAA gasoline price data, as Memorial Day weekend marked the official start of of the summer driving season.

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Additional reporting by Shadia Nasralla in London and Jeslyn Lerh; Editing by Marguerita Choy and Edmund Blair

Our standards: The Thomson Reuters Trust Principles.


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