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Oil Prices Tumble Double-Digits as UAE, Iraq Call for Higher OPEC Output 

Published 03/09/2022, 01:01 PM
Updated 03/09/2022, 02:59 PM
© Reuters.

© Reuters.

By Barani Krishnan

Investing.com -- President Joe Biden is beginning to hear from the UAE and Iraq some of the “music” he wants on OPEC oil production. 

But the offer of more barrels could also be conditional at some point and exact a political price that might scuttle world powers’ nuclear deal with Iran, jeopardizing the chance for even more output to cool a market at 14-year highs.

Crude prices were down double digits on Wednesday after the United Arab Emirates’ ambassador to Washington, Yousef Al Otaiba, said in a widely-circulated statement to the media that the number two energy producer in the Gulf “favors oil production increases."

The UAE “will be encouraging OPEC to consider higher production levels," Otaiba said, referring to the 13-member Saudi-led Organization of the Petroleum Exporting Countries.

“The UAE has been a reliable and responsible supplier of energy to global markets for more than 50 years and believes that stability in energy markets is critical to the global economy,” Otaiba said.

His remarks were followed by Iraq’s Oil Minister Ihsan Abdul-Jabbar Ismail who said OPEC+ will strive to achieve market balance.

“If OPEC+ requires it, we can increase output,” he said, saying that the global oil producers alliance will discuss supply decisions at its next meeting in April.

Brent, the global benchmark for oil, settled down $16.84, or 13.2%, at $111.14 a barrel. It was its sharpest one-day percentage drop since April 2020.

U.S. crude’s West Texas Intermediate, or WTI, benchmark settled down $15, or 13%, at $108.70. Like Brent, it was also WTI’s biggest one-day percentage slump since April 2020.

OPEC has been raising output by only a nominal 400,000 barrels daily for each month since last year through its pact with another 10 oil producers steered by Russia under a combined alliance known as OPEC+. That alliance is still withholding some 5 million barrels of daily supply under pandemic-era production cuts initiated in May 2020.

Biden announced a U.S.-only ban on Russian oil imports on Tuesday in an action aimed at further isolating a country that on its own provides 10% of world supply.

Analysts widely viewed the U.S. ban as little more than “noise." Russian oil made up 3% of U.S. consumption last year.

But the UAE-sponsored boost and the UAE/Iraq plan to ask the same of OPEC could be a “game-changer of sorts,” said John Kilduff, partner at New York energy hedge fund Again Capital.

“This is the music Biden has been wanting to hear from OPEC, but it could come at a political price eventually that hurts the nuclear deal with Iran,” said Kilduff.

The UAE, like Saudi Arabia, is technically a U.S. ally that most recently received additional U.S. military ​defensive support to help them against Houthi threats from Yemen. 

But the UAE has also been calling on the United States to re-designate the Iran-backed militia on the Foreign Terror Organization list, which the White House appears unwilling to do. 

The demand that Tehran’s Islamic Revolutionary Guards Corp stays off Washington’s terror list is one of those put by Iranian negotiators to the nuclear talks with world powers. The talks that have dragged on for months are at their final stages and could pave the way for the legitimate return of Iranian oil to the global export market, without the U.S. sanctions they have faced since 2018.

It is not known if the Emiratis will insist on their demand for the redesignation of the IRGC as a terror group as a condition for adding meaningfully to their oil supplies. 

Saudi Arabia, the de facto head of OPEC and OPEC+, has, meanwhile, remained uncooperative with the U.S. and other oil consuming countries throughout the Russia-Ukraine war.

 

Latest comments

1. Russia is member of opec2. oil is paid in $ and €3. Russian labor ist is paid in ruble4 guess who will be the lowest cost producer of oil in the world ?
make no mistake, the only way this war ends is when Russia takes Ukraine. and maybe when that happens you could make the argument that that is really just the start of the war. This is less about NATO membership and Ukraine cozying up to the West and more about Putin's fundamental vision that Ukraine doesnt exist.
putler is a coward, now he's getting his a(ss) handed to him he's looking for a way to slither back out again
As USA is falling in recession need for energy drops. So will the price and the dollar. Bull? Run 🏃 🏃 for the hills.
Prices at the pump are only going up Biden. And Biden said yesterday that they will go much higher. Obviously he wants 150 a barrel. His poor liberals will pay the tax. That is his only plan
Brent free-fell as low as $107.50 from $134.70 (Top) this morning, it's now around $115. I've been going long since $110 by adding $160k, perhaps to add more as long as the indicator is over-sold.
False reporting… this is a dangerous game you’re playing with main street.. sling shot back to 140/150bbl
what the moment sir .. buy or sell ..
 We need to see what happens on the war front next 2 days. Also, Saudi response ... they don't mind wrecking the economy of consuming countries, so long as MbS can get his vengeance against Biden for ignoring/insulting him.
exactly MBS has no reason to budge. He wants a mafia friendly world so his power stays safe.
"His remarks were followed by Iraqi Oil Minister Ihsan Abdul-Jabbar Ismail, who said OPEC+ will work to achieve market balance. "If OPEC+ demands it, we can increase production," he said. The problem is that OPEC+ is OPEC+ Russia, which will obviously refuse.
Stephane, Iran is another big thing. They won't allow the IRGC to be redesignated as terror group.
Why UAE and Iraq entered in war? Iraq destroyed by US and Ukraine missile in 2003 and still potty eating. UAE is powerless, they only fear from US. Think one day all power go when die.
oil 145$ next week😁😁😁
max.r@investing.com
max.r@investing.com
Why UAE and Iraq entered in war. Iraq destroyed by US and Ukraine crane and still potty eating. UAE is powerless, they only fear from US. Think one day all power go when die.
We scored some infinite number of bulls WIVES today
The fly in the ointment here, is that increased output (by anybody) hastens reserves depletion (great for today, not so great for forever). Tic-toc.
Oil is spurned. You want people money? Do high tech & green technology.
All bulls are by now castrated.
the joke is on anyone selling right now. OPEC has made it clear they want to keep the high cost of oil. The United States will have to be the ones to produce more if they plan to lower cost any. $150 oil is on the way and possibly higher.
$175 in my opinion
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