Russia’s Oil Output Cut Contributes to Crude-Oil Price Hike
Crude-oil prices experienced a significant rise on Friday, resulting in a weekly gain, following Russia’s announcement of a retaliatory measure against western price limits. Russia plans to decrease its oil output by 500,000 barrels per day in March.
Russia Prioritizes Price Over Volume
Russia’s move is a signal to the market that it would rather maintain its oil price rather than increase its volume, according to market experts.
Western Price Caps on Russian Oil and Oil Products
The European Union imposed a ban on imports of seaborne Russian oil and oil products and, in collaboration with the Group of Seven, established price caps for seaborne Russian oil and oil products.
Ban on References to Illegitimate Restrictions in Oil Contracts
To counteract the threat to the global oil market, Russia has implemented a ban on references to any illegitimate restrictions in oil supply contracts, either directly or indirectly, according to Russia’s Energy Minister, Novak.
Russia Refuses to Sell Oil to Adherents of Price Ceiling Principles
Russia has stated that, to date, it has been selling its entire oil production volume. However, it will not sell oil to those who adhere directly or indirectly to the principles of the price ceiling, as per Novak’s statement.
Price Cuts as a Sign of Difficulty in Unloading Energy Products
Some market observers believe that the price cuts could be a sign that Russia is facing difficulties in selling its energy products.
U.S. Crude and Brent Oil on the Rise
Despite the differing opinions, U.S. crude is estimated to experience a roughly 8% gain for the week, while Brent oil is expected to see a similar increase, according to FactSet.
China’s Comeback as the Key Driver of Oil Outlook
Analysts at Goldman Sachs have noted that China’s comeback is the most persistent driver of the oil outlook. The 1.1 million barrel per day increase in China’s demand this year is expected to push oil markets back into deficit by June, leading to higher prices and OPEC’s reversal of its November 2022 production cut in the latter half of 2023.
Goldman Sachs Adjusts Brent Oil Price Forecast for 2023 and 2024
Despite the positive outlook, Goldman Sachs has adjusted its Brent oil spot price forecast for 2023 to $92 per barrel, from $98 and for 2024, to $100 from $105. The revision is due to a modest softening in the 2023 balance and a lower path for long-dated prices, according to the analysts.