Oil posted its biggest weekly gain in four months after Russia followed through on a threat to cut output in response to Western energy sanctions.
Moscow says it will cut output by half a million barrels, equivalent to about 5% of January levels. The cut was the first major effect on Russian output from the band of sanctions that have been placed on the country’s output, prompting West Texas Intermediate to advance just below $80.
This week’s rally was also boosted by Saudi Arabia’s decision to sell barrels at higher prices to Asian countries amid stronger demand from China and supply disruptions in Turkey, Norway and Kazakhstan.
Russian Deputy Prime Minister Alexander Novak says the country’s production cut is voluntary and a response to Western price caps. Still, analysts have forecast some production losses following the recent sanctions announcements, according to Daniel Ghali, a commodities strategist at TD Securities.
“Russia may be presenting these production losses as a decision to reduce its oil production when they have occurred independently,” Ghali said.
Despite the cuts, Russia’s partners in the OPEC+ coalition signaled they would not raise output to fill the reductions.
Prices:
- West Texas Intermediate for March delivery rose $1.66 to settle at $79.72 a barrel in New York.
- Brent for April settlement rose $1.89 to $86.39 a barrel.
(with help from Natalia Kniazhevich)