Oil prices rise as Russia announces plan to cut output by 5%

Oil prices rose Friday after Russia announced plans to cut its oil production by 500,000 barrels per day in March.

The cut is equivalent to about 5 per cent of Russian oil output, reports said.

“As of today, we are fully selling the entire volume of oil produced, however, as stated earlier, we will not sell oil to those who directly or indirectly adhere to the principles of the ‘price cap’,” Russian Deputy Prime Minister, Alexander Novak, was quoted by Reuters as saying in a statement.

“In this regard, Russia will voluntarily reduce production by 500,000 barrels per day or around 5% of output in March. This will contribute to the restoration of market relations,” Mr Novak said.

Russia’s decision to cut its production comes days after the Organisation of Petroleum Exporting Countries (OPEC) agreed to maintain its planned monthly oil output.

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OPEC and its allies had in October last year agreed to cut oil output by 2 million barrels per day in November, the deepest cut by OPEC+ since the 2020 COVID pandemic.

The decision came despite pressure from the United States and others advocating that the group should increase its output.

OPEC argued that it took the decision “in light of the uncertainty that surrounds the global economy and oil market outlooks, and the need to enhance the long-term for the oil market.”

The move was announced days after the European Union (EU) sanctions against Russian oil took effect in retaliation for Russia’s invasion of Ukraine.

The EU had in May last year unveiled plans to phase out imports of Russian oil as part of sanctions for Russia’s invasion of Ukraine.

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Also, in December last year, the G7 nations, the European Union and Australia agreed to impose a price cap of $60 a barrel on Russian oil shipped to other countries that have not adopted an embargo.

Russia is the world’s second-biggest crude oil exporter, according to the International Energy Agency (IEA).

Prices

On Friday, the price of crude oil rose on the news of the output cut from Russia.

Brent crude futures rose $1.71, or 2.02%, to $86.21 a barrel by 1148 GMT. U.S. West Texas Intermediate (WTI) crude futures were up $1.57, or 2.01%, at $79.63.

Both contracts rose by more than $2 earlier in the session and were on course for weekly gains above 8%, Reuters reported.