Dubai: Oil posted its largest weekly gain in four months after Russia followed through on a threat to cut production in response to western energy sanctions.
Moscow says it will reduce output by half a million barrels, equivalent to about 5% of January levels. The cut was the first major effect on Russian production from the swath of sanctions that have been placed on the country’s output, leading West Texas Intermediate to advance to just below $80.
This week’s rally also got a boost from Saudi Arabia’s decision to sell barrels at higher prices to Asian countries amid stronger demand from China as well as supply disruptions in Turkey, Norway and Kazakhstan.
Russian Deputy Prime Minister Alexander Novak says the country’s production cut is voluntary and a response to western price caps. Still, analysts have been predicting some output losses following the recent sanctions announcements, according to Daniel Ghali, a commodity strategist at TD Securities.
“It is possible that Russia is portraying these output losses as a decision to cut their oil production when they might have occurred regardless,” Ghali said.
Despite the cuts, Russia’s partners in the OPEC+ coalition signaled they won’t boost output to fill in for the reductions.