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Oil prices slide after report Saudi Arabia could step up if Russian output dips under sanctions

Oil prices slide after report Saudi Arabia could step up if Russian output dips under sanctions

Oil prices plummeted after reports that Saudi Arabia is planning to raise crude output if Russia’s supply falls drastically due to EU sanctions.

According to the Financial Times, Saudi Arabia is aware of the ramifications of a supply problem, and it is “not in their interests” to lose control of oil prices, according to sources.

Oil prices fell during Asia’s early trading hours. On the international market, Brent crude futures were down 1.68 percent at $114.34 a barrel. In the United States, crude futures sank 1.87 percent to $113.10 per barrel.

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EU leaders agreed on Monday to block 90 percent of Russian crude by the end of the year as part of the EU’s sixth sanctions package against Russia since its invasion of Ukraine. As a result, oil prices began to rise.

Saudi Arabia, OPEC’s de facto leader, has not yet experienced serious oil market shortages, according to the Financial Times. Despite the fact that oil prices have risen considerably this year, it has so far bucked US requests to boost output faster.

When economies around the world reopen following the pandemic, however, demand for petroleum may soar.

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As the number of daily Covid cases declines, major cities in China, the world’s top oil importer, are beginning to lift restrictions.

“While it’s not an unequivocal commitment, Saudi Arabia appears to have thrown the West a bone,” said Matt Simpson, a market analyst at City Index, a U.K.-based trading platform, in a note following the statement.

“This will be favorably received by Western governments,” he wrote, “given that inflation – and inflation expectations – remain eye-wateringly high, and central banks struggle to boost rates at the risk of pushing their economies into recession.”

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The FT report comes before Russia’s participation in the OPEC+ alliance’s monthly meeting on Thursday. Russia is the world’s second-largest crude oil exporter, after Saudi Arabia.

At the same time, The Wall Street Journal reported, citing anonymous OPEC delegates, that some OPEC+ countries are considering suspending Russia from an oil output deal.

OPEC delegates are concerned, according to sources, about rising economic pressure on Russia and its ability to pump more petroleum to lower high prices.

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