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Oil contracts rebounded after Russia announced it would slash its crude output in response to a Western price cap that was imposed on exports after Moscow’s invasion of Ukraine.
Brent, the international benchmark, and its US counterpart WTI, which had been down earlier in the day, jumped more than two percent after Russian deputy prime minister Alexander Novak said production would be cut by 500,000 barrels per day, or five percent of output, in March.
“Crude prices reacted positively to the news, considering that so far Russian oil production has been relatively resilient,” said UBS analyst Giovanni Staunovo.
“The move … aims to improve oil revenues by narrowing the discount of Russian oil to Brent.”
An EU-wide ban on Russia oil products — like diesel, gasoline and jet fuel — came into effect Sunday alongside a Group of Seven (G7) price cap on the same items.
That expanded on the EU embargo on seaborne oil deliveries introduced two months ago — when it also established with G7 partners a $60-dollar-per-barrel cap for Russian exports.
Oil, already bolstered by the reopening of top consumer China after lengthy pandemic restrictions, rebounded further on the news from Novak, who in charge of Moscow’s energy policy.
Russia is part of a 23-nation alliance with the OPEC crude cartel that already agreed in October to reduce output by two million barrels per day until the end of this year.
