Saudi Arabia is prepared to raise crude production if Russia’s output significantly falls

Oil prices have been falling for the third session in a row on Thursday, giving up gains after the recent rally that took Brent crude above $120 a barrel for the first time since March. Earlier today, the futures briefly derailed the $113 mark before trimming some losses in recent trading.

Oil traders are nervous ahead of the OPEC+ meeting due later today. The alliance is widely expected to approve a July increase of 432,000 barrels a day. As Russia is now lagging the group amid the ongoing conflict with Ukraine, Saudi Arabia said it is prepared to raise crude production if Russia’s output significantly falls in the aftermath of European Union sanctions. As a reminder, EU leaders on Monday agreed to ban 90% of Russian crude by the end of the year as part of the sixth sanctions package on Moscow. Of note, OPEC delegates highlighted they did not discuss the possibility of Russia being excluded from a global oil production pact. 

Elsewhere, the API report showed overnight that US crude oil stockpiles fell by about 1.2 million barrels last week versus a build of 567,000 barrels during the previous week. Gasoline inventories fell by 256,000 barrels last week, while distillate stocks declined by about 858,000 barrels. Later today, the EIA’s official report could affect near-term sentiment in the oil market, but the focus remains on OPEC.

On the positive side, the USD retreats on Thursday, giving up yesterday’s gains as traders opted to take profit after a brief jump towards 1.5-week highs around 102.75. Now, the greenback needs to hold above 102.00 in order to avoid a deeper retreat. In turn, a resurgent demand for the safe-haven US currency could cap the potential recovery in the oil market. 


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