Oil edges back up despite Putin’s pledge to honor supply commitments

By Shariq Khan

BENGALURU (Reuters) – Oil edged higher on Thursday after its biggest plunge in two years in the previous session, as uncertainty over Russian supplies roiled the market despite Moscow’s reassurance over its contractual energy obligations.

Since Russia’s Feb. 24 invasion of Ukraine, oil markets have been the most volatile in two years, with global benchmark Brent crude recording its biggest decline since April, 2020, on Wednesday, just a couple of days after hitting a 14-year high at over $139 a barrel.

Brent futures were up $1.29, or 1.2%, to $112.43 a barrel by 11:50 a.m. ET (1650 GMT), while U.S. West Texas Intermediate (WTI) crude rose 63 cents, or 0.6% to $109.33 a barrel.

“I think some of the ‘war angst’ is coming out of the market,” said John Kilduff, partner at Again Capital in New York. “We rejected $130 twice this week. People are beginning to ask if there really is too much of a supply problem. There’s still plenty of Russian supply,” he said.

Addressing a government meeting, President Vladimir Putin said Russia – a major energy producer which supplies a third of Europe’s gas and 7% 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 amid uncertainty over where replacement supply will come from, comments from United Arab Emirates (UAE) officials sent conflicting signals, adding to the volatility.

Brent slumped 13% on Wednesday after the UAE’s ambassador to Washington said his country would encourage the Organization of the 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 per day (bpd) 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 over the past few years.

The market also took into account moves by the United States to ease sanctions on Venezuelan oil and efforts to seal a nuclear deal with Tehran, which could lead to increased oil supply.

Further supply could also come from stockpile releases coordinated by the International Energy Agency and growing U.S. output.

“With some goodwill, co-ordination and luck, the supply shock can greatly be mitigated but probably not neutralised,” PVM oil market analyst Tamas Varga said.

(Reporting by Shariq Khan, additional reporting by Shadia Nasralla, Sonali Paul and Mohi Narayan; Editing by Marguerita Choy and Mark Potter)