Oil rises as Russia cuts output after Western price cap
- By AFP -
- Feb 11, 2023
Oil contracts rebounded Friday 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.
– Rate jitters –
Elsewhere, Wall Street extended losses at the opening bell, but both the Dow and S&P 500 finished higher, lifted in part by a surge in petroleum-linked shares like Chevron and oil services company Halliburton.
Briefing.com analyst Patrick O’Hare said investors are in “wait and see” mode ahead of next week’s consumer price index report, which will influence the outlook for future Fed interest rate hikes.
Having spent January optimistic that the days of central bank tightening would soon come to an end, traders have been brought back down to earth this month as they contemplate borrowing costs going higher and staying there longer than previously expected.
– UK skirts recession –
Government data showed Britain registered zero growth in the final quarter of last year, in line with expectations after shrinking 0.3 percent in the previous three months, according to the Office for National Statistics.
The report means the British economy skirted a technical recession, defined as two straight quarters of negative growth. But the FTSE 100 still slipped 0.5 percent after having hit record highs earlier this week.
“In reality, the nuances of whether the UK is or isn’t in a recession are likely to be lost on the majority of people, many of whom are struggling with their finances on a day-to-day basis,” said market analyst Michael Hewson at CMC Markets.
Bucking the downward stock markets trend, Tokyo rose Friday on a weaker yen, though the currency rallied after the market closed on reports that the Japanese government would nominate Kazuo Ueda to replace Haruhiko Kuroda as head of the country’s central bank.
Ueda is an economist and former member of the Band of Japan policy board. But analysts said the yen’s advance may be more to do with the fact deputy governor Masayoshi Amamiya would not take the post, which would have likely seen a continuation of the current dovish approach.
“While unexpected and a potentially hawkish development it probably doesn’t change that much from a monetary policy point of view in the short term,” said Hewson.
– Key figures around 2130 GMT –
- Brent North Sea crude: UP 2.2 percent at $86.39 per barrel
- West Texas Intermediate: UP 2.1 percent at $79.72 per barrel
- New York – Dow: UP 0.5 percent at 33,869.27 (close)
- New York – S&P 500: UP 0.2 percent at 4,090.46 (close)
- New York – Nasdaq: DOWN 0.6 percent at 11,718.12 (close)
- London – FTSE 100: DOWN 0.4 percent at 7,882.45 (close)
- Frankfurt – DAX: DOWN 1.4 percent at 15,307.98 (close)
- Paris – CAC 40: DOWN 0.8 percent at 7,129.73 (close)
- EURO STOXX 50: DOWN 1.2 percent at 4,197.94 (close)
- Tokyo – Nikkei 225: UP 0.3 percent at 27,670.98 (close)
- Hong Kong – Hang Seng Index: DOWN 2.0 percent at 21,190.42 (close)
- Shanghai – Composite: DOWN 0.3 percent at 3,260.67 (close)
- Euro/dollar: DOWN at $1.0684 from $1.0740 on Thursday
- Pound/dollar: DOWN at $1.2051 from $1.2121
- Euro/pound: DOWN at 88.56 pence from 88.61 pence
- Dollar/yen: DOWN at 131.42 yen from 131.59 yen