Oil prices rise after Russia says it will cut output

A rig undergoes maintenance at an oil well in the Permian Basin oil production area near Wink, Texas August 22, 2018.

Nick Oxford | Reuters

Russia will cut oil production by 500,000 barrels per day in March, Deputy Prime Minister Alexander Novak said on Friday, following a Western ban on Moscow’s crude and petroleum products implemented for several months. via.

The announced production reductions account for about 5% of Russia’s latest crude oil production, which the Paris-based watchdog International Energy Agency estimates fell by 9.77 million barrels per day in December. .

The Brent contract for April delivery was trading at $86.26 a barrel at 11 a.m. London time, up $1.76 a barrel – more than 2% – on the news from Thursday’s close. The Nymex WTI contract last month expired in March at $79.72 a barrel, also up 2% from the previous settlement.

Novak says the cuts will “help restore market relations”, according to Google translation of comment reported by state news agency Tass.

He noted that the cuts do not apply to condensate and will be calculated from actual production levels, not from Russia’s quotas under the OPEC+ production agreement. The decision was not made in consultation with the OPEC+ alliance co-chaired by Moscow.

OPEC+ producers often have to reach consensus on output policy, with members tied to their targets. But the group has previously allowed voluntary gestures that honor the spirit of existing output agreements – in this case, Russia’s decline will be based on OPEC+’s earlier decision to reduce total output plus 2 million barrels per day, agreed last October.

Other OPEC producers facing sanctions, such as Venezuela and Iran, have requested and are exempt from their production quotas. Several OPEC+ delegates previously told CNBC that Russia has no intention of requesting a similar adjustment so far.

The EU implemented a ban on imports of crude oil by sea on December 5 and oil products this week. Under a program adopted by the wealthiest nations of the G-7, Western suppliers can continue to provide the vital transportation and financial services for transporting Russian volumes to destinations. non-G7, as long as these fuels are purchased below a specific ceiling price.

“As previously stated, we will not sell oil to those who directly or indirectly adhere to the ‘price ceiling’ principle,” Novak reiterated on Friday, adding that the price-ceiling program has This can lead to a shortage of oil and oil products.

“Lower Russian production coupled with China’s reopening will tighten the oil market further in the coming quarters,” UBS strategist Giovanni Staunovo said in a Friday note to clients. row.


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