Oil Prices On A Rollercoaster After UAE Retracts Increased Supply Talk

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Oil prices plunged by 17% Wednesday after the United Arab Emirates (UAE) had urged OPEC producers to increase output given sanctions that threaten Russian supply. However, prices rose 5% Thursday when the UAE recoiled on the announcement and ensured it would for now stick to OPEC’s monthly output deal.

Oil Prices Chaos

As reported by BBC News, Yousuf Al Otaiba, UAE Ambassador to the U.S., offered a glimmer of hope amid skyrocketing prices by saying in a statement Wednesday: “We favor production increases and will be encouraging OPEC to consider higher production levels.”

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The statement, which was tweeted by the UAE Embassy in Washington, was later contradicted the following day when energy Minister Suhail al-Mazrouei said the country would stick to current OPEC’s monthly output agreement, which determines how much crude member countries should produce.

U.S. President Joe Biden and European leaders have committed to easing the surging prices, while government officials have been in contact with other crude producers to encourage an increase in supplies.

German Economy Minister Robert Habeck urged OPEC producers to increase output “to create relief on the market.”

Pressing Situation

Since February 24 —day one of Russia’s invasion of Ukraine— oil prices have skyrocketed by 30% peaking to $139 a barrel. The bobbing prices mean that oil plunged to $106 Wednesday and went back up to $116 a barrel Thursday morning.

Amid the situation, Stephen Innes, managing partner of SPI Asset Management, said: “To suggest the oil market is confused would be an understatement as we are in an unprecedented situation.”

Commonwealth Bank commodities analyst Vivek Dhar added, “We think it will be challenging for OPEC+ to boost production in this environment.”

Russia's invasion of Ukraine increased price pressures as sanctions are making it hard for the Eurasia giant to find new buyers. The International Energy Agency’s move to release 60 million barrels from strategic national reserves is bound to do little for price upsurge.