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Oil price rises as Opec backs higher output

OPEC debates oil output boost amid Russian isolation
OPEC debates oil output boost amid Russian isolation

PARIS: Oil prices rose on Thursday even as major crude producers agreed to boost output by more than the usual amount following an EU ban on Russian imports.

European shares rose in mid-afternoon trading, with Frankfurt edging 0.6 per cent higher and Paris up by more than one per cent. London's FTSE 100 was shut for a holiday.

Wall Street stocks were little changed early on Thursday following mixed labour data and a Microsoft earnings warning.

All eyes were on Vienna where the Opec+ group of major oil producers, led by Saudi Arabia and Russia, agreed to boost oil output more than expected in light of the Russian attack on Ukraine.

Producers had been expected to stick to their policy of only increasing output modestly, as they have done since May 2021.

But, amid soaring prices and hard on the heels of the EU ban on most Russian oil imports, pressure has been rising for the 23-member cartel to boost output to stabilise prices.

At the end, the group agreed to add 648,000 barrels per day to the market in July, up from 432,000 in previous months.

The move did not appear to be enough to calm oil markets, with the benchmark Brent crude up 0.4 per cent at $116.79 per barrel and West Texas Intermediate also 0.5 per cent higher at $115.80.

Soaring energy prices have fuelled growth inflation around the world, hampering economic growth and prompting central banks to hike rates.

Earlier in the day, oil prices had fallen more than two per cent after a Financial Times report said that Saudi Arabia was considering a plan to boost output as Russia struggles to meet targets owing to Ukraine war-linked sanctions.

The FT report followed a Wall Street Journal article saying Opec was considering removing Russia from an agreement that has locked producers into limited output increases, which analysts said could lead to an early end of the pact and allow nations to open the taps more.

Concerns about tighter Russian supplies have sent crude soaring this year, just as demand picks up owing to the reopening of farming but Riyadh has ignored previous calls to pump more.

"One can expect trading activity involving oil to remain volatile," Patrick J O'Hare of said.

'Brace yourself'

Asia was mostly in negative territory. Hong Kong shed one per cent, while Tokyo, Sydney, Seoul, Singapore, Wellington, Manila, Jakarta and Taipei were also well down. Shanghai and Mumbai edged up.

Concern over the outlook was shared by Wall Street titan Jamie Dimon, who warned that the wave of outbreaks were combining to cause an economic super-storm.

"That hurricane is right out there down the road coming our way," the JPMorgan Chase & Co boss said. "We don't know if it's a minor one or Superstorm Sandy. You better brace yourself."

However, in sign of the huge uncertainty coursing through markets, a top strategist at the bank, Marko Kolanovic, painted a more positive picture, forecasting a market recovery through 2022.

"We remain positive on risky assets due to near record-low positioning, bearish sentiment, and our view that there will be no recession given support from US consumers, global post-Covid reopening, and China stimulus and recovery," he wrote in a note.

Russia a 'pariah'

Talks by videoconference begin at the technical level at 1200 GMT coordinated by the OPEC headquarters in Vienna, before moving into a plenary session.

European Union leaders agreed on Monday to ban more than two-thirds of Russian oil imports as part of a sixth package of sanctions on Moscow over its offensive in Ukraine.

Britain has already said it plans to phase out Russian oil imports by the end of 2022 and eventually stop importing its gas.

The United States, too, banned Russian oil and gas days after Russia's attack began on February 24.

"Russia has now transformed into a pariah... Apparent elevated US-Saudi shuttle diplomacy lately may indicate that change in OPEC+ may be near," Seb, analyst Bjarne Schieldrop commented.

"More oil from Saudi and the UAE will allow the West to implement sharper bans forcing Russian oil exports lower while not blowing up the oil price," Schieldrop added.

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