OIL RECORDS WEEKLY GAINS

OIL PRICES rose more than 2% on Friday and posted weekly gains of over 8%, as Russia announced plans to reduce oil production next month after the West imposed price caps on the country’s crude and fuel.

Brent crude futures climbed to settle at $1.89, or 2.2%, to $86.39 (about R1 542) a barrel. US West Texas Intermediate crude futures (WTI) were up $1.66, or 2.1%, at $79.72 a barrel.

Brent posted a weekly gain of 8.1%, while WTI gained 8.6%.

Russia plans to reduce its crude oil production in March by 500 000 barrels per day (bpd), or about 5% of output, Deputy Prime Minister Alexander Novak said.

Western nations have imposed restrictions, trying to choke off Russia’s oil revenues in response to the country’s actions in Ukraine. The production cut indicates that the EU’s recent price cap and ban on Russian oil products, which came into effect on February 5, have had some impact.

“Most analysts have already penciled in Russian production falling by 700 000-900 000 in 2023,” said Rebecca Babin, senior energy trader at CIBC Private Wealth US. “The key for crude to break out of its current trading range is Chinese demand recovery.”

Russia’s output last year defied predictions of a decline, but its oil sales will prove more difficult in the face of the new sanctions.

Opec+ plans no action after Russia announced oil output cuts, two Opec+ delegates told Reuters.

“In the very short-term, (Russia’s output cut) doesn’t mean very much as there’s significant refinery maintenance schedule dampening demand today, but as we go forward and world oil demand continues to recover, it increases the supply deficit,” said Andrew Lipow, president of consultants Lipow Oil Associates.

Economic concerns still pressured prices, with weak demand data from China and recession fears in the US since June.