Oil Ends Week On High After Initial Panic Over UAE "Leaving" OPEC

The UAE indicated it can increase oil production without quitting the cartel: File Image/Pixabay

After incurring losses due to incorrect reporting about a disgruntled Organization of Petroleum Exporting Countries (OPEC) member, oil trading recovered on Friday to end the session with another round of gains, again buoyed by good economic demand news coming from China.

Prices initially slid when the Wall Street Journal reported that the United Arab Emirates was considering leaving OPEC in order to increase its production output; but two sources with direct knowledge of the matter quickly jumped in and declared that "This is definitely not on the table."

This was supported by UAE energy minister Suhail al-Mazrouei stating last year that plans to raise production capacity did not mean the country was going to leave the cartel.

Traders accordingly reverted back to bull mode on the strength of reports earlier this week that China's manufacturing activity grew in February at the fastest pace in more than a decade, coupled with its seaborne imports of oil from Russia expected to reach a record high this month.

Specifically, Vortexa and Kpler estimated that nearly 43 million barrels of Russian crude oil, comprising about at least 20 million barrels of ESPO Blend and 11 million barrels of Urals, will reach China in March; the previous record was 42.48 million barrels in June 2020.

Brent on Friday rose $1.08, or 1.3 percent, to settle at $85.83 per barrel, while West Texas Intermediate rose by $1.52, or 1.9 percent, at $79.68 per barrel; both benchmarks posted their highest closing levels since Feb. 13.

Largely dismissed was a 10th consecutive week of U.S. crude inventory builds, as well as Pierre Wunsch, governing council member of the European Central Bank, warning that a key interest rate could climb as high as 4 percent if inflation continues its upward trajectory.

Wunsch told media, "If the core inflation would remain at the level we see today in Europe of above 5 percent, and if we don't get clear signals that core inflation is going down, we will have to do more."

As for Friday's misleading news about the UAE, Christyan Malek, global head of energy strategy at JP Morgan, said, "The response by the UAE to this news is telling of its conviction to prevent oil prices sliding."