Oil expands gains as major producers like Saudi Arabia and UAE point out the limited capacity
The UAE and Saudi Arabia are seen in the Organization of the Petroleum Exporting Countries (OPEC) as the only two countries with spare capacity to make up for lost supply in Russia and weak production in other member countries.
However, oil prices rose for a third day on Tuesday as major producers Saudi Arabia and the United Arab Emirates looked unlikely to increase production significantly.
Political unrest in Libya and Ecuador increased supply concerns.
The series of negative supply news supported the market. Two major producers, Saudi Arabia and the UAE, are said to be at or very close to their short-term capacity limits.
At GMT 06.44 Brent crude futures rose $1.9, or 1.7%, to $116.99, they had been up 1.7% in the previous session. West Texas Intermediate (WTI) crude futures rose $1.8, or 1.6%, to $111.36, increasing the previous session's gain of 1.8%.
UAE Energy Minister Suhail al-Mazrouei said on Monday that the UAE, together with OPEC and its allies, is producing near-maximum capacity, based on a quota of 3,168 million barrels per day (bpd) under the OPEC+.
Analysts also warned that political unrest in Ecuador and Libya could further tighten supply.
The Libyan National Oil Company said on Monday that it may have to declare a force majeure in the Gulf of Sirte region over the next three days if production and transportation at oil terminals do not continue.
Ecuador's Ministry of Energy has said the country may suspend oil production entirely over the next two days due to anti-government protests. The former OPEC country was producing around 520,000 barrels per day before the protests.
These factors underscore the shortage in the market and lead to a rebound in prices this week, countering the recessionary fluctuations in prices over the previous two weeks. However, market sentiment is still fragile due to geopolitical factors in the lens.
G7 leaders are discussing a potential price cap for Russian oil that would hit President Vladimir Putin's strategy while simultaneously lowering energy prices.
Global powers consider all options, including talks with producing countries such as Iran and Venezuela, to ease Russia's pressure on energy supplies that have increased prices.
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