Oil pared an earlier increase but was still trading higher after Russia said it plans to cut March production by 500,000 barrels a day.
(Bloomberg) — Oil pared an earlier increase but was still trading higher after Russia said it plans to cut March production by 500,000 barrels a day.
Brent crude was up 1.3% after earlier nearing $87 a barrel. The move is the first indication of a major impact on Russian production since a swath of sanctions was placed on the country’s output over the last three months.
Russia’s partners in the OPEC+ coalition signaled they won’t boost output to fill in for the reductions announced by Moscow.
Russia’s production cut will be voluntary and is a response to western price caps, Deputy Prime Minister Alexander Novak said in a statement. The country is able to sell its oil volumes and it does not want to adhere to price restrictions imposed by western nations.
“Russia will turn the oil market from a buyer’s market to a seller’s market,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “That should remove the crude oil rebate on Russian crude which now plagues Russian oil income.”
Prior to the announcement of the cut, crude was already on track for its biggest weekly advance since mid-January. A host of bullish drivers emerged this week, as Saudi Arabia showed confidence in China’s oil demand recovery by lifting its prices, while there have been disruptions in Turkey, Norway and Kazakhstan.
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