By Barani Krishnan
Investing.com -- Oil prices fell for a second day in a row after President Vladimir Putin said Russia will honor its energy sales to all its customers, even those who had punished Moscow for the war against Ukraine.
“We will stand by our energy commitments. It is surprising we are doing this,” Putin said, adding that included exports to ‘unfriendly countries’ that had piled sanctions on Moscow since its invasion of Ukraine that began on Feb. 24.
Russia provides about 10% of the world crude supply and 40% of Europe’s gas needs. The United States has been particularly tough in acting against the Kremlin over Ukraine, banning all Russian energy imports.
The rest of the West, comprising Europe, Britain, Canada and Australia have piled multiple economic sanctions on Russia, while specifically avoiding measures against the country’s energy commodities which they are so reliant on.
Brent, the global benchmark for oil, settled down $1.81, or 1.6%, at $109.33 a barrel, reacting to Putin's remarks.
U.S. crude’s West Texas Intermediate, or WTI, benchmark settled down 2.68, or 2.5%, at $106.02.
Aside from Putin’s remarks, Brent was also pressured by a 32% hike in trading margins imposed by exchange operator ICE (NYSE:ICE).
The higher margin requirement comes amid one of the wildest weeks of swings in oil prices, with Brent moving as much as $33 between the highs and lows of a day after last week’s $20 range.
“The higher trading margin will flush out some of the most leveraged hedge funds in the game from accessing Brent,” said John Kilduff, partner at New York-based energy hedge fund Again Capital. “The net effect is usually a less volatile and lower-priced market.”
Thursday’s drop in oil came on the back of the previous session’s 13% plunge — the worst since April 2020, when global crude markets were decimated by the onset of the coronavirus pandemic.
Wednesday’s tumble came after the United Arab Emirates’ ambassador to Washington, Yousef Al Otaiba, said the number two energy producer in the Gulf “favors oil production increases” to help increase supplies and reduce prices for consuming countries struggling with tighter crude markets and soaring inflation.
Iraq’s Oil Minister Ihsan Abdul-Jabbar Ismail said he was also agreeable to raising production if that was the will of OPEC+ — the alliance of 23 oil producing nations that banded OPEC’s original 13 led by Saudi Arabia with another 10 steered by Russia.
UAE’s Energy Ministry on Thursday, however, recanted Ambassador Otaiba’s statement, saying its commitment to OPEC+ would not change and that there would be no unilateral move on its part to raise oil supplies.