Oil extends losses; Russia to fulfil supply contracts

Since Russia's Feb 24 invasion of Ukraine, oil markets have been the most volatile in two years. PHOTO: REUTERS

BENGALURU (REUTERS) - Oil prices settled about 2 per cent lower on Thursday (March 10) after a volatile session, a day after their biggest daily dive in two years, as Russia pledged to fulfil contractual obligations and some traders said supply disruption concerns were overdone.

Since Russia's Feb 24 invasion of Ukraine, oil markets have been the most volatile in two years. On Wednesday, global benchmark Brent crude posted its biggest daily decline since April, 2020. Two days earlier, it hit a 14-year high at more than US$139 a barrel.

Brent futures fell US$1.81, or 1.6 per cent, to settle at US$109.33 a barrel after gaining as much as 6.5 per cent earlier in the session. US West Texas Intermediate (WTI) crude fell US$2.68, or 2.5 per cent, to settle at US$106.02 a barrel, giving up more than 5.7 per cent of intraday gains.

The market extended losses post-settlement, with Brent down to US$109.09 and WTI down to US$105.79 at 5:55am on Friday, Singapore time.

"I think some of the 'war angst' is coming out of the market," said Mr John Kilduff, partner at Again Capital in New York.

"We rejected US$130 twice this week. People are beginning to ask if there really is too much of a supply problem. There is still plenty of Russian supply," he said.

Russian President Vladimir Putin told a meeting that the country, a major energy producer that supplies a third of Europe's gas and 7 per cent of global oil, would continue to meet its contractual obligations on energy supplies.

However, oil from the world's second-largest crude exporter is being shunned over its invasion of Ukraine, and many are uncertain where replacement supply will come from.

Comments from United Arab Emirates officials sent conflicting signals, adding to the volatility.

On Wednesday, Brent slumped 13 per cent after the UAE's ambassador to Washington said the No. 3 Opec producer would encourage the Organisation of Petroleum Exporting Countries to consider higher output.

UAE Energy Minister Suhail al-Mazrouei backtracked on the ambassador's statement and said the Opec member is committed to existing agreements with the group to boost output by only 400,000 barrels a day each month.

While the UAE and Saudi Arabia have spare capacity, some other producers in the Opec+ alliance are struggling to meet output targets because of infrastructure underinvestment in recent years.

The United States made moves to ease sanctions on Venezuelan oil and efforts to seal a nuclear deal with Teheran, which could lead to increased oil supply. The market also anticipates further stockpile releases coordinated by the International Energy Agency and growing US output.

"With some goodwill, coordination and luck, the supply shock can greatly be mitigated but probably not neutralised," PVM oil market analyst Tamas Varga said.

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Still, traders refused to call the oil rally over. Some said the recent slump could be due partly to profit-taking, noting that oil has remained up over 15 per cent since the Ukraine invasion.

"We will probably have more speculation and some people who want to sell to take advantage, but we're just in new territory here," said Mr Thomas Saal, senior vice-president for energy at StoneX Financial.

"The pattern does not look like we are at the top yet. Just when you think we are, the market finds new energy to go higher," he said.

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