Oil Rises As Traders Take Solace In Possible Massive Russian Production Cut

That plus China's reopening will tighten the market, analysts say: File Image/Pixabay

Oil on Thursday was on the upswing of the roller coaster that is crude trading in 2023, with investors obsessed by the possibility of demand destruction (due to bank rate hikes) taking solace in speculation that Russia plans to significantly cut oil exports from its western ports.

Specifically, three sources in the Russian oil market told media that the former Soviet Union plans to cut exports by up to 25 percent for the month of in March, in a bid to boost prices for its oil and exceeding the volume of previously announced cuts.

Russia had already announced plans to cut its oil production by 500,000 barrels per day (bpd) in March, amounting to 5 percent of its output or 0.5 percent of global production.

Russia normally exports up to 2.5 million bpd of Urals crude from Primorsk, Ust-Luga and Novorossiisk, and a 25 percent cut would represent as much as 625,000 bpd if confirmed.

UBS analysts said this combined with China's reopening will tighten the oil market and support prices; as a result, Brent on Thursday settled up $1.61, or 2 percent, to $82.21 per barrel.

West Texas Intermediate settled up $1.44, also 2 percent, to $75.39 per barrel.

However, the gains were said to be limited due to the Energy Information Administration reporting that U.S. crude stockpiles rose by 7.6 million barrels in the week to Feb. 17, compared to the 2.1 million-barrel rise expected by analysts.

Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, said , "We're stuck in this shoulder season for oil where we're not yet into summer seasonals, we're getting out of winter seasonals and the markets are marking time."

In fact, data paints a slightly more severe picture: Bloomberg on Thursday noted that crude's nine-day relative strength index, a key technical momentum indicator, dipped below 32 this week "as bearish U.S. supply data and concerns about continued interest rate hikes sent the commodity to six straight losing sessions."

A relative strength index of 30 indicates the market is oversold.