Russia cutting Oil production prices rising
2023.02.10 08:12
Russia cutting Oil production prices rising
By Tiffany Smith
Budrigannews.com – As Russia announced plans to reduce oil production next month in response to the West imposing price caps on the country’s oil and oil products, oil prices increased by more than 2% on Friday, heading for weekly gains.
By 1148 GMT, futures had risen $1.71, or 2.02%, to $86.21 per barrel. Crude futures for U.S. West Texas Intermediate (WTI) were up $1.57, or 2.01%, to $79.63.
Earlier in the session, both contracts gained more than $2 and were on track for weekly gains of more than 8%.
According to Deputy Prime Minister Alexander Novak’s announcement on Friday, Russia intends to cut production by 500,000 barrels per day (bpd), or about 5% of total output, in March.
Stephen Brennock, a PVM analyst, stated, “The Russian economy is fraying in the face of Western sanctions.”
As part of Western sanctions regarding Russia’s actions in Ukraine, the economies of the G7, the European Union, and Australia agreed to prohibit the use of Western-supplied maritime insurance, finance, and brokering for seaborne Russian oil priced above $60 a barrel beginning on December 5.
Additionally, as of February 5, the EU imposed price caps and banned purchases of Russian oil products.
Giovanni Staunovo, an analyst at UBS, stated, “We believe the decision (to cut oil production) is not completely a voluntary one… as market factors likely forced the Russian side to make this decision.”
Despite the fact that predictions predicted a decline in Russia’s output last year, the new western sanctions will make it more difficult for Russia to sell oil.
Staunovo added that Russia’s efforts to divert refined oil to other markets may also be hindered by the limited availability of tankers.
Against the backdrop of weak demand data from China and fears of a recession in the United States, the announcement brought about a reversal of the bearish sentiment that characterized trade on Thursday and Friday morning.
Additionally, it follows an increase in oil inventories and a rise in weekly U.S. jobless claims. Goldman Sachs (NYSE:) [EIA/S] lowered its Brent 2023 price forecast from $98 to $92 per barrel (bbl) and its 2024 price forecast from $105 to $100 per barrel (bbl).
However, hedge fund manager Pierre Andurand maintains his bullish outlook, telling the Financial Times that if Chinese demand recovers in 2023, oil could reach $140 per barrel.
