Brent under pressure as market prices in Russia’s March production cut

Front-month ICE Brent has declined by $1.00/bbl on the day from Friday, to $85.67/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Russia will voluntarily cut its oil production by 500,000 b/d from current production levels in March, according to Russia's Deputy Prime Minister Alexander Novak.

ANZ commodity strategist Daniel Hynes believes that Russia’s production cut could tighten supply in the oil markets. The Oxford Institute for Energy Studies (OIES) has projected Russia’s crude production to decline by 530,000 b/d to 10.2 million b/d this year, from 10.7 million b/d last year.

OIES has estimated Brent to surge past $100/bbl from May if “balances tighten faster.” It has also raised its global oil demand growth outlook for this year, by 150,000 b/d to 1.6 million b/d. “Downside risks to the outlook persist but eased, with global oil demand in 2023 expected to move past the COVID shock in the second half of the year,” it adds.

Downward pressure:

“The weakness that we are seeing in prices in early morning trading today likely reflects the market coming to the realisation that these [Russian production] cuts are already largely priced in,” says ING’s head of commodities strategy Warren Patterson.

BP resumed tanker loadings of Azerbaijani crude oil at the Turkish port of Ceyhan on Sunday, the company's Baku office spokeswoman Tamam Bayatli has told Bloomberg. BP had declared a force majeure on loadings of Azeri crude from Ceyhan following the 7.8-magnitude earthquake in Turkey and Syria last week.

By Konica Bhatt

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