Oil prices rose more than 2% on Friday, and crude gauges rose more than 8% week on week as Russia announced plans to cut oil production next month after the West set price caps on the country’s crude and fuel oil.
Brent crude futures rose $1.89, or 2.2%, to $86.39 a barrel. West Texas Intermediate crude futures (WTI) were up $1.66, or 2.1%, at $79.72.
Brent gained 8.1% for the week, while WTI gained 8.6%.
Western countries have imposed restrictions by trying to cut oil revenues in response to Russia’s actions in Ukraine.
Deputy Prime Minister Alexander Novak said Russia plans to cut crude oil production by 500,000 barrels per day (bpd) or about 5% of production in March.
Russia’s output last year defied estimates of decline, but oil sales will be harder in accordance with the face of new sanctions.
The production cut shows that the European Union’s price caps and ban on Russian oil products, which took effect on February 5, had some effect. Analysts predict that in 2023, Russian production will fall by 700,000-900,000 barrels per day.
OPEC+ is not planning any action after Russia announced oil production cuts, some OPEC+ delegates said.
In the very short term, Russia’s production cuts don’t mean much as there are significant refinery maintenance programs that reduce supply, but as time progresses and world oil demand continues to recover, there will be a supply shortage.
Also, for now, weak demand data from China and fears of a recession in the US, and economic concerns continue to keep prices under pressure. The rise in weekly US jobless claims and rising oil inventories are also capping gains.
OPEC country officials say oil could continue to rise in 2023 as demand in China recovers after COVID restrictions are lifted and a lack of investment restrains growth in supply and the rising number sees a possible return to $100 per barrel. It is unclear whether this is a prediction or a wish.
Goldman Sachs lowered its Brent 2023 price forecast from $98 to $92 per barrel and its 2024 price forecast from $105 to $100.
In U.S. supply, energy firms have increased the number of oil rigs in a week since June, while reducing the most number of gas rigs in a week since October 2017, according to energy services firm Baker Hughes Co.
The total number of oil and gas rigs, an early indicator of future production, rose two to 761 in the week through February 10.