Oil prices settled about 2% lower on Thursday after a volatile session, a day after its biggest daily dive in two years, as Russia pledged to fulfil contractual obligations and some traders said supply disruption concerns were overdone.
Since Russia's Feb. 24 invasion of Ukraine, oil markets have been the most volatile in two years. On Wednesday, global benchmark Brent crude posted its biggest daily decline since April, 2020. Two days earlier, it hit a 14-year high at over $139 a barrel.
Brent futures fell $1.81, or 1.6%, to settle at $109.33 a barrel after gaining as much as 6.5% earlier in the session. U.S. West Texas Intermediate (WTI) crude fell $2.68, or 2.5%, to settle at $106.02 a barrel, giving up over 5.7% of intraday gains.
The market extended losses post-settlement with Brent down to $109.09 and WTI down to $105.79 at 4:55 p.m. ET (2155 GMT).
"I think some of the 'war angst' is coming out of the market," said John Kilduff, partner at Again Capital in New York. "We rejected $130 twice this week. People are beginning to ask if there really is too much of a supply problem. There's still plenty of Russian supply," he said.
Russian President Vladimir Putin told a meeting that the country, a major energy producer which supplies a third of Europe's gas and 7% of global oil, would continue to meet its contractual obligations on energy supplies.
However, oil from the world's second-largest crude exporter is being shunned over its invasion of Ukraine, and many are uncertain where replacement supply will come from.
Comments from United Arab Emirates (UAE) officials sent conflicting signals, adding to the volatility.
On Wednesday, Brent slumped 13% after the UAE's ambassador to Washington said the No. 3 OPEC producer would encourage the Organization of the Petroleum Exporting Countries to consider higher output.
UAE Energy Minister Suhail al-Mazrouei backtracked on the ambassador's statement and said the OPEC member is committed to existing agreements with the group to boost output by only 400,000 barrels per day (bpd) each month.
While the UAE and Saudi Arabia have spare capacity, some other producers in the OPEC+ alliance are struggling to meet output targets because of infrastructure underinvestment in recent years.
The United States made moves to ease sanctions on Venezuelan oil and efforts to seal a nuclear deal with Tehran, which could lead to increased oil supply. The market also anticipates further stockpile releases coordinated by the International Energy Agency and growing U.S. output.
"With some goodwill, co-ordination and luck, the supply shock can greatly be mitigated but probably not neutralised," PVM oil market analyst Tamas Varga said.
Still, traders refused to call the oil rally over. Some said the recent slump could be due partly to profit-taking, noting oil remained up over 15% since the Ukraine invasion.
"We will probably have more speculation and some people who want to sell to take advantage, but we're just in new territory here," said Thomas Saal, senior vice president for energy at StoneX Financial Inc.
"The pattern does not look like we are at the top yet. Just when you think we are, the market finds new energy to go higher," he said.