Oil prices end up as Russia orders output cuts

HOUSTON — Oil prices settled higher on Monday as orders from the Russian government to curb oil output, and attacks on energy infrastructure in both Russia and Ukraine offset the United Nation’s demand for a ceasefire in Gaza.

Brent crude futures settled $1.32 higher or 1.55% at $86.75 a barrel. US crude futures settled $1.32 higher or 1.64% at $81.95.

Both benchmarks have risen steadily this year, with Brent up nearly 11% and West Texas Intermediate (WTI) up about 12.5% by Friday’s close, on expectations that interest rates in major economies will come down by the summer, and geopolitical tensions in eastern Europe and the Middle East.

Moscow, meanwhile, has ordered companies to reduce oil output in the second quarter to meet a production target of nine million barrels per day by the end of June, in line with its pledges to the producer group OPEC+ (Organization of the Petroleum Exporting Countries and their allies including Russia), three industry sources said on Monday.

“Russia is committed to the OPEC+ cuts. They are looking beyond the current supply and demand fundamentals and looking at unity with OPEC+, as well as the risk of a bigger price shock further down the road,” said Phil Flynn, analyst at Price Futures Group.

Attacks on Russian energy facilities and Ukrainian energy infrastructure have stoked supply concerns, said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.

Another Russian oil refinery had half of its capacity knocked out in a drone attack over the weekend, sources told Reuters. It was the latest casualty from a string of attacks by Ukraine this month that have shuttered 7% of total refining capacity, Reuters calculations show.

Russia attacked Ukrainian generating and transmission facilities last week and over the weekend, causing blackouts in many regions.

Elsewhere, the UN Security Council adopted a resolution on Monday demanding an immediate ceasefire between Israel and Palestinian militants Hamas and the release of all hostages after the United States abstained from the vote.

“We will have to see how the UN resolution on a ceasefire actually plays out on the ground in Gaza, and whether that would ultimately result in the Houthis stopping their attacks on tanker traffic in the Red Sea,” Andrew Lipow, president of Lipow Oil Associates said.

Yemen-based Houthi rebels have been ramping up attacks on ships traversing the Red Sea in support of Palestinians in Gaza.

A ceasefire could help relieve supply bottlenecks if the Houthis wind down their attacks by allowing vessels to use the Suez Canal rather than taking longer, more costly diversions around the horn of Africa.