By Barani Krishnan

Investing.com — Oil consumers — and market bears — may be getting a little of what they want.

Some OPEC members are exploring the idea of suspending Russia’s participation in the alliance’s oil-production deal as Western sanctions and a partial European ban begin to undercut Moscow’s ability to pump more, the Wall Street Journal reported.

“Exempting Russia from its oil-production targets could potentially pave the way for Saudi Arabia, the United Arab Emirates and other producers in the Organization of the Petroleum Exporting Countries to pump significantly more crude, something that the U.S. and European nations have pressed them to do as the invasion of Ukraine sent oil prices soaring above $100 a barrel,” the Journal reported, citing OPEC sources familiar with the move.

According to the news, oil prices fell quickly from Tuesday’s peak on Tuesday and reversed a rally of four days.

The London-traded crude oil benchmark was at $116.38, down 1 cent, or 1.1%. This barrel is intended for delivery in August by 2:45 ET (18:45 GMT). The price reached $120.80 on Tuesday.

New York-traded , the benchmark for US crude, settled Tuesday’s trade down 40 cents, or 0.4%, at $114.67 for its July delivery contract.  In the previous session, it traded at $119.97.

Brent hit 14-year highs of just above $139 on March 7, some two weeks after Russia’s invasion of Ukraine set a raft of Western sanctions against Moscow’s energy and other exports. WTI hit a new 2008 record on the same day and reached just above $130. Strong expectations were high that these benchmarks would return to March’s peak this week, as the European Union declared Monday that it will ban all Russian oil imports. This was after two months worth of negotiations. 

Brent still saw a strong May finish, and WTI was up 10%. This is a six-month streak of gains for Crude Oil Prices.

The Journal reported that the Journal had reported an OPEC decision, which put a new spin on the market, though it is still unknown.

Russia’s oil output is expected to fall by about 8% this year. But it couldn’t be determined whether Moscow would agree to be exempted from the production targets of OPEC that also involves 10-non OPEC countries banded together with OPEC under a broader group OPEC+.

Saudi Arabia has been ensuring that 23 member countries of the OPEC+ global oil exporters group have less crude than is needed to keep barrel prices at their best for more than a decade. While the supply crisis was still manageable until the end of last year, the Ukraine invasion and resulting sanctions on Russia led to disruptions of at least ​​3 million barrels more per day, leaving consuming nations with virtually no breathing space. 

The crisis is worsened by the fact that the United States has a severely reduced supply of gasoline and diesel due to the closing and downsizing many refineries in response to the coronavirus pandemic. 

US refineries that have stayed in the business are now providing only what they can — or, more accurately, what they desire — without putting any of the money into expanding existing capacity or acquiring the idled plants that can be reopened to provide some measurable relief to consumers. The reason the refineries are doing this is to make record profits, which may be lost in expansion. Another factor is the slow turnaround time required for any new refinery in order to make a profit.

Bloomberg estimates that more than 1.0 million barrels per day of U.S. oil refining capacity — or about 5% overall — has shut since the COVID-19 outbreak initially decimated demand for oil in 2020. Outside of the United States, capacity has shrunk by 2.13 million additional barrels a day, energy consultancy Turner, Mason & Co says. Bottom line is that there are no plans to expand the capacity.

“So far, there is no formal push for OPEC to pump more oil to make up for any potential Russian shortfall, but some members in the Persian Gulf have begun planning for an output increase sometime in the next few months,” the Journal reported, citing OPEC delegates.