DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange reversed lower in afternoon trade Thursday, with both the U.S. and international crude benchmarks falling as much as 2%. The declines came after key members of the Organization of the Petroleum Exporting Counties called to increase oil production in a face of stringent sanctions slapped on Russian oil and gas exports by the United States, Canada and the United Kingdom.

The United Arab Emirates ambassador to Washington, Yousef Al Otaiba, voiced his support for OPEC+ producers to increase oil output above previously agreed to targets to cool off a price rally that is widely expected to dampen demand growth. Iraq also supported an output hike, and said they had spare capacity to produce more. Last week, the alliance agreed to increase production by 400,000 barrels per day (bpd) in April -- roughly the same volume it raised in the past four months. The calls for OPEC+ to increase production come as Russia's intensifying war with Ukraine enters its 14th day, with fighting raging across the country.

Peace talks between Russia's Foreign Minister Sergei Lavrov and Ukrainian counterpart Dmytro Kyleba in Turkey on Thursday failed to produce a ceasefire agreement or safe passage for civilians trying to flee the besieged city of Mariupol. When he emerged from the meeting, Kyleba said at a news conference that the talks had been "both easy and difficult."

"Easy because Minister Lavrov basically followed his traditional narratives about Ukraine, but difficult because I did my best to find a diplomatic solution to the humanitarian tragedy unfolding on the battleground and in the besieged cities," he said.

No progress had been made on Ukraine's proposal for a 24-hour ceasefire, Kyleba said, nor on the establishment of a humanitarian corridor.

Nearly 2 million Ukrainians have fled the country since the beginning of hostilities, with several Ukrainian cities turned into rubble, and the number of civilian casualties growing to an unacceptably high level for an unprovoked and asymmetrical conflict instigated by Russian President Vladimir Putin. Faced with the dire situation, Ukrainian President Volodymyr Zelensky said Ukraine is ready for a diplomatic solution and compromise regarding Ukraine's membership in the North Atlantic Treaty Organization along with status of Crimea and breakaway republics of Donbass and Lugansk. He added Ukraine will require additional security guarantees from any aggression in the future.

On the back of rising costs for energy and food, the U.S. consumer price index surged 7.9% year-on-year, the fastest pace of inflation since 1982, up from 7.5% in January. Nearly every category of goods and services got pricier. Gasoline jumped 6.6% and accounted for almost a third of the price hike. Grocery costs jumped 1.4%, the sharpest one-month increase since 1990 other than during a pandemic-induced price surge two years ago. The cost of fruits and vegetables rose 2.3%, the largest monthly increase since 2010.

The Federal Reserve is widely expected to raise interest rates at its two-day monetary meeting next week.

In the European Union, where inflation hit 5.1% in February, the European Central Bank on Thursday said it would wind down some of its pandemic-era asset purchase program sooner than expected in response to price pressures.

"If the incoming data support the expectation that the medium-term inflation outlook will not weaken even after the end of our net asset purchases, the Governing Council will conclude net purchases under the APP in the third quarter," said ECB this morning.

The bank said monthly net purchases under the APP would amount to 40 billion euros ($44.5 billion) in April, 30 billion euros in May, and 20 billion euros in June.

The central bank's benchmark refinancing rate remains at 0%, the rate on its marginal lending facility sits at 0.25% and the rate on its deposit facility was kept at -0.5%.

The ECB decision comes exactly two weeks after Putin launched a full-scale invasion of Ukraine. The conflict has rattled the global economy and sent shockwaves through financial markets, with Western allies imposing a barrage of sanctions against Russia.

On the session, NYMEX April West Texas Intermediate fell $2.68 to $106.02 per bbl, and ICE Brent May contract declined $1.81 to $109.33 per bbl. NYMEX April RBOB futures dropped 13.71 cents to $3.1567 per gallon, and April ULSD futures fell 16.81 cents to $3.2962 per gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges can be reached at liubov.georges@dtn.com