Due to Russia's Production Cut, Oil Prices Rise More Than 2%

Oil prices increased by more than 2% on Friday and registered weekly gains of over 8%, as Russia announced plans to restrict oil production the following month in response to price caps imposed by the West on Russia's crude and fuel.

Brent crude futures increased by $1.89, or 2.2%, to settle at $86.39 per barrel. Futures on West Texas Intermediate crude rose $1.66, or 2.1%, to $79.72 a barrel.

Brent exhibited a weekly increase of 8.1%, while WTI rose 8.8%.

Deputy Prime Minister Alexander Novak stated that Russia aims to lower its crude oil production in March by 500,000 barrels per day (bpd), or around 5% of output.

In response to Russia's activities in Ukraine, Western nations have placed restrictions in an effort to suffocate its oil earnings. The output drop implies that the recent price cap and ban on Russian oil products implemented by the European Union on February 5 have had some effect.

According to Rebecca Babin, senior energy trader at CIBC Private Wealth U.S., "most analysts have already accounted for a 700,000-900,000 barrel decline in Russian production in 2023." The resurgence of Chinese demand is essential for crude to exit its present trading range.

Russia's production bucked projections of a fall last year, but additional sanctions will make oil sales more difficult.

Two OPEC+ delegates told Reuters that no action is planned in response to Russia's oil output restrictions.

"In the short-term, Russia's output decrease doesn't mean much because refinery maintenance is dampening demand," said Andrew Lipow, head of consulting firm Lipow Oil Associates. "However, as world oil demand continues to rebound, it deepens the supply shortfall," he added.

With dismal demand statistics from China and fears of a U.S. recession, economic worries continued to exert pressure on pricing. A spike in weekly U.S. jobless claims and an increase in oil inventories also limited advances. [EIA/S]

Goldman Sachs (NYSE:GS) reduced its Brent pricing projection for 2023 to $92 per barrel from $98 and for 2024 to $100 per barrel from $105.

OPEC countries officials told Reuters that oil prices could return to $100 per barrel in 2023 as Chinese demand rebounds following the repeal of COVID restrictions and supply growth is limited by a lack of investment.

Baker Hughes Co, an energy services company, reported that U.S. energy businesses reduced the number of natural gas rigs by the most in a week since October 2017 and added the most oil rigs in a week since June.

The total number of oil and gas rigs, a leading indicator of future output, increased by two to 761 in the week ending February 10.

The U.S. Commodity Futures Trading Commission (CFTC) will again postpone release of a weekly Commitments of Traders report planned on Friday after a ransomware attack on a unit of ION Markets, the agency said in a statement.