Talk of a potential deal that would let other OPEC+ producers make up the crude supply gap left by Russia has put a lid on oil prices, but it would take much more to bring them down, analysts said.
“Exempting Russia from the OPEC+ output deal and allowing other producers such as Saudi Arabia to pump more might bring some temporary relief to the market, but the lack of sufficient spare capacity represents an increasingly binding constraint at a time of resurging postpandemic mobility,” said Edoardo Campanella, a Milan-based economist at UniCredit Bank, in a Wednesday note.
Oil futures pulled back from session highs to end mixed following the report on Tuesday. Crude futures were higher in Wednesday’s session, with August Brent crude BRN00, -1.79% BRNQ22, -1.79%, the global benchmark, up 63 cents, or 0.6%, at $116.25 a barrel on ICE Futures Europe. West Texas Intermediate crude for July delivery CL.1, -1.98% CLN22, -1.98%, the U.S. benchmark, rose 55 cents, or 0.5%, to $115.22 a barrel on the New York Mercantile Exchange.
“While Russian output has proven somewhat resilient so far, output is expected to drop in the coming weeks and months,” he wrote. “That could move Russia into similar status as countries like Libya or Iran who have even been left out of coordinated production efforts due to a mix of political unrest and international sanctions.”
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