Oil prices fell after a report that Saudi Arabia is ready to increase crude oil production if Production in Russia drops significantly after European Union sanctions.

 

The Financial Times reported, citing sources, that Saudi Arabia is aware of the risk of supply shortages and that "it is not in its interest to lose control over oil prices."

 

Oil prices fell in the morning hours of trading in Asia. Futures for the international benchmark Brent crude oil fell by 2.12% to $113.82 per barrel. U.S. crude futures fell 2.18% at $112.75 a barrel.

 

EU leaders on Monday agreed to ban 90% of Russian oil by the end of the year as part of the sixth package of sanctions the bloc has imposed against Russia since its invasion of Ukraine. Initially, this led to an increase in oil prices.

 

Sources told the FT that Saudi Arabia, the de facto leader of OPEC, has yet to see a real shortage in oil markets. So far, it has ignored pressure from Washington to accelerate production increases as oil prices have risen sharply this year.

 

But that could change when economies around the world reopen amid a pandemic recovery, boosting demand for crude oil.

 

These include China, the world's largest oil importer, where major cities are beginning to ease restrictions as daily Covid cases decline.

 

"While not a direct promise, Saudi Arabia [seems] has thrown a bone to the West," Matt Simpson, a market analyst at Britain-based trading platform City Index, wrote in a post-news release note.

 

"This will be well received by Western leaders, given that inflation – and inflation expectations – remain at sky-high levels, and central banks are trying to raise rates, risking plunging their economies into recession," he added.

 

The FT report comes ahead of the monthly meeting of the OPEC+ alliance on Thursday, which includes Russia. Russia is the second largest exporter of crude oil in the world after Saudi Arabia.

 

At the same time, some members of OPEC+ are also considering the possibility of removing Russia from participating in the deal on oil production, reports The Wall Street Journal, citing unnamed OPEC delegates.

 

OPEC delegates are reportedly concerned about growing economic pressure on Russia and its ability to pump more oil to lower rising prices.