(Bloomberg Opinion) — Oil soared after Russia said it plans to cut March production by 500,000 barrels a day.
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Brent crude rose as much as 2.6% in London to trade above $86 a barrel, erasing an earlier decline, while West Texas Intermediate topped $80 a barrel. The move is the first major indication of an impact on Russian production since a series of sanctions were imposed on the country’s production in the last three months.
Russia’s production cut will be voluntary and is a response to Western price caps, Deputy Prime Minister Alexander Novak said in a statement. The country can sell its volumes of oil and does not want to adhere to the price restrictions imposed by Western nations.
“Russia will turn the oil market from a buyer’s market to a seller’s market,” said Bjarne Scieldrop, chief commodity analyst at SEB AB. “That should eliminate the crude oil rebate on Russian crude that now affects Russian oil revenues.”
Prior to the cut announcement, crude was already on track for its biggest weekly gain since mid-January. A series of bullish drivers emerged this week as Saudi Arbaia showed confidence in China’s oil demand recovery by raising its prices, while there have been disruptions in Turkey, Norway and Kazakhstan.
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