Russian 'Retaliation' Contributes To Oil Posting Weekly Gains Of Over 8%

by Ship & Bunker News Team
Friday February 10, 2023

Oil trading ended with a bang on Friday thanks to Russia stating it will reduce output next month: the commodity rose over 2 percent and posted a weekly gain of over 8 percent.

Brent settled up $1.89, or 2.2 percent, to $86.39 per barrel while West Texas Intermediate settled up $1.66, or 2.1 percent, at $79.72; for the week, Brent gained 8.1 percent and WTI gained 8.6 percent.

Alexander Novak, vice president of Russia, caused the price escalation by stating that his country plans to reduce its crude production by 500,000 barrels per day (bpd) in March, or about 5 percent of total output, in response to the restrictions imposed by Western countries against the former Soviet Union.

Novak said, "As of today, we are fully selling the entire volume of oil produced, however, as stated earlier, we will not sell oil to those who directly or indirectly adhere to the principles of the 'price cap.'

"In this regard, Russia will voluntarily reduce production by 500,000 bpd in March; this will contribute to the restoration of market relations."

Reportedly, lower export volumes shrank Russia's account surplus by 58.2 percent to $8 billion in January, at a time when Moscow is ramping up its aggression against Ukraine.

But Rebecca Babin, senior energy trader at CIBC Private Wealth U.S., wasn't impressed that the news caused oil's rise on Friday; she said, "Most analysts have already penciled in Russian production falling by 700,000-900,000 in 2023; the key for crude to break out of its current trading range is Chinese demand recovery."

Also, Russia's retaliation is bad news for other countries: an official with the G-7-backed price cap coalition told the Washington Examiner that since the G-7 and its price cap partners have largely banned imports of Russian oil and Russian refined products, Moscow's new production cuts for the main will be disproportionately felt by developing countries rather than the countries that enacted the sanctions.