Oil gains ground on Russia supply worries, heads for weekly gain

Oil futures rose Friday, on track for weekly gains, as concerns grew about a drop in Russian exports following the imposition of a price cap by G7 countries earlier this month. Russia’s deputy prime minister, Alexander Novak, told state television Friday that Russia could reduce oil output by 5% to 7% in the new year, according to news reports. Price action West Texas Intermediate crude for February delivery CL00, +2.76% CL.1, +2.76% CLG23, +2.76% rose $1.72, or 2.2%, to $79.21 a barrel on the New York Mercantile Exchange, putting the US benchmark on track for a 6.7% weekly advance. February Brent crude BRNG23, +2.54%, the global benchmark, was up $1.64, or 2%, at $82.62 a barrel on ICE Futures Europe. March Brent BRN00, +2.28% BRNH23, +2.28%, the most actively traded contract, rose $1.51, or 1.9%, to $83.18 a barrel. Back on Nymex, January gasoline RBF23, +2.38% rose 1.9% to $2.291 a gallon, while January heating oil HOF23, +2.82% was up 1.7% at $3.184 a gallon. January natural gas NGF23, -0.90% ticked down 0.2% to $4.987 per million British thermal units, on track for a weekly fall of more than 24%. Market drivers “Oil is headed for a sizable weekly gains on China’s fast-tracked policy pivots and on threats, idle or not, that Russia might cut crude production in response to the price cap imposed by G-7 after Deputy Prime Minister Alexander Novak said so on state television Friday,” said Stephen Innes, managing director of SPI Asset Management, in a note. Preliminary data pointed to a collapse in the volume of Russian seaborne oil exports in mid-December, said Tatiana Orlova, lead emerging markets economist at Oxford Economics, in a Friday note. The figures suggest some success in meeting the price cap objective of curtailing Russia’s revenues, but less in terms of keeping Russian crude on the market, Orlova said. Bloomberg reported earlier this week that Russia’s total seaborne crude exports plunged by 1.86 million barrels a day, or 54% week over week, to just 1.6 million barrels a day in the week ending Dec. 16. Reuters on Friday reported that exports of Russia’s Urals crude from Baltic ports could fall by a fifth in December. “The collapse in volumes appears related to logistics including shipping shortages; we see no evidence that Russia is deliberately cutting its oil exports,” Orlova wrote. Russia is still weighing its response to the imposition of a European Union embargo on imports of seaborne Russian crude and an EU/G-7 price cap on Russian crude that came into force on Dec. 5, “but we think Russia will seek to avoid further damage to its oil output and exports in the current circumstances,” she said. Oil lost ground Thursday as the US dollar rebounded and a winter storm barreled across the US, curtailing holiday travel plans.

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