Oil production in Russia. Illustrative photo.
London/New York – Oil prices rose today on news that Russia plans to cut output next month. Brent North Sea crude gained 1.9 percent around 17:00 CET and was above $86 per barrel. U.S. West Texas Intermediate (WTI) crude oil rose 1.7 percent to trade above $79 a barrel.
Russian Deputy Prime Minister Alexander Novak announced today that Russia will reduce oil production by 500,000 barrels per day in March, or roughly five percent. According to Novak, this move is related to Russia's earlier decision not to sell oil to entities that will apply the price ceiling on Russian oil imposed by Western countries.
The European Union, together with the G7 group of economically advanced countries and Australia, introduced a maximum price of $60 per barrel of Russian oil transported by sea on December 5. If this limit is exceeded, it is prohibited to transport oil and insure its transportation. On Sunday, February 5, the price caps on Russian oil products also came into force.
“We are now selling all our oil production. But as we have said before, we will not sell oil to those who will directly or indirectly use the mechanism price ceiling,” said Novak. “In this context, Russia will voluntarily reduce production by 500,000 barrels per day in March,” he added.
Analyst Giovanni Staunovo from UBS believes, however, that Russia's decision to reduce production is not entirely voluntary. “The Russian side was probably forced to this decision by market factors,” he said.
Oil prices in dollars per barrel (about 159 liters):
|EXCHANGE||TYPE||CONTRACT||CURRENT PRICE||PREVIOUS CLOSE||London – ICE||Brent||April||86.11||84.50|
|New York – NYMEX||WTI||March||79.40||78.06|