Oil prices recovered from Tuesday’s losses and rose more than 3% early on Wednesday, as Russia indicated it would want rubles not only for gas, but also for oil, metals and grains.
Wednesday at 9:34 a.m. ET, ahead of the Energy Information Administration’s weekly U.S. oil inventory report, WTI Crude rose 3.63% to $108.00, and Brent Crude traded 3.45% to $114.03.
Oil market volatility continued this week. Oil prices plunged early yesterday, with the US benchmark briefly dipping below $100 a barrel after signs emerged that the resumption of peace talks between Russia and Ukraine could have been constructive after two weeks. During talks in Istanbul on Tuesday, Russia pledged to significantly scale back its military operations and activities around Kiev and in the northern city of Chernihiv. Ukraine, for its part, proposed to maintain a neutral status and not to join alliances or receive troops from other countries on its territory.
However, the US sounded skeptical about Russia’s promises to scale back its campaign, and on Wednesday, the market didn’t seem to respond to Moscow’s promises. Prices also rose after the American Petroleum Institute (API) estimated late Tuesday that 3.0 million barrels of crude would be drawn this week, compared with analysts’ forecasts of a decline of 1,558 million barrels.
On Wednesday, energy markets in Europe braced for a potential disruption to Russia’s natural gas supply, ahead of the March 31 deadline that Vladimir Putin had given Gazprom and the central bank to settle ruble payments for gas.
In addition, Moscow signaled today that it could soon demand rubles for other exports, including those of oil, metals and grains.
“Given the level of uncertainty in the market right now, coupled with the tight balance between supply and demand, we expect oil prices to remain extremely volatile. Falling market liquidity will also increase volatility,” ING strategists Warren Patterson and Wenyu Yao said on Wednesday.
By Tsvetana Paraskova for Oilprice.com
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