Brent Plunges 12% as US Coordinates Plans to Balance Market

By Adedapo Adesanya

The price of Brent crude plunged by 12.79 per cent or $16.37 to $111.6 per barrel on Wednesday amid indications of possible progress by the world’s largest producer, the United States, in encouraging more oil production from other sources.

Also, the price of the US West Texas Intermediate (WTI) went down at the midweek session by 11.84 per cent or $14.65 to trade at $109.0 per barrel.

Last week, the International Energy Agency released 60 million barrels of oil reserves to compensate for supply disruptions following Russia’s invasion of Ukraine.

Now, the US is encouraging more oil production from others as it coordinates efforts to allow the market to slow down from its shocks.

One of its considerations is Venezuela, to which it has reportedly promised sanction relief in exchange for a commitment to supply oil to US refineries.

Reuters reported that Iraq said it could increase output if asked by the Organisation of the Petroleum Exporting Countries and allies (OPEC+).

The Middle East producer sees OPEC+ monthly increases as enough to address any potential shortage in the oil market as supply and demand are well balanced, citing state-owned crude marketer SOMO on Wednesday.

“Iraq has additional production and exporting capacity estimated at 6 per cent, but investments are needed to bring it to the market,” it added.

The US Secretary of State, Mr Antony Blinken also signalled that the United Arab Emirates (UAE) would support increased production by OPEC+.

Still, oil prices have surged this month with crude oil up more than 15 per cent as Russia, the world’s second-largest crude exporter, invaded Ukraine.

The latest spike in prices came after President Biden said he would ban all Russian energy imports just as the United Kingdom announced its own restrictions on buying Russian oil imports, saying it will phase out the country’s imports by the end of the year and the European Union also unveiled a plan to reduce dependence on Russian fossil fuels.

Also helping the market on Wednesday was the bullish data from the US Energy Information Administration (EIA), which reported a crude oil inventory draw of 1.9 million barrels for the week to March 4.

At 411.6 million barrels, the EIA said crude oil inventories are 13 per cent below the five-year average for this time of the year.

A week earlier, the EIA had estimated an inventory draw of 2.6 million barrels, which helped strengthen the oil price rally accelerated by Russia’s invasion of Ukraine.