On Monday, oil prices increased following the Russian government’s directive to reduce production amidst ongoing tensions between Russia and Ukraine, impacting the energy industry.
Brent crude futures saw a rise of $1.20, or 1.4%, reaching $86.63 per barrel by 1202 ET (1602 GMT), while U.S. crude futures gained $1.27, or 1.58%, settling at $81.90. This year has witnessed a consistent rise in both benchmarks, with Brent nearly 11% higher and WTI up approximately 12.5% as of Friday’s close.
- Attacks on energy infrastructure continue from both Russian and Ukrainian forces.
- The Russian government has directed companies to cut back on oil production.
- Still, no agreement reached in the Gaza ceasefire discussions.
- Throughout this year, both oil benchmarks have seen a steady increase.
Expectations of a decrease in interest rates across major economies by summer have bolstered prices.
In Moscow, the government has instructed companies to scale back oil production in the second quarter, aiming for a target of 9 million barrels per day (bpd) by the end of June. This aligns with commitments made to the OPEC+ group, as stated by three industry sources on Monday.
Phil Flynn, an analyst at Price Futures Group, commented, “Russia is adhering to the OPEC+ reductions. Their focus extends beyond current supply-demand dynamics, emphasizing solidarity with OPEC+ and the potential for a more significant price impact in the future.”
Hiroyuki Kikukawa, president of NS Trading at Nissan Securities, noted that attacks on both Russian and Ukrainian energy facilities, coupled with diminishing prospects for a ceasefire in the Israel-Hamas conflict, have heightened concerns over supply.
Additionally, a drone attack over the weekend severely impacted a Russian oil refinery, halving its capacity, as reported by sources to Reuters. This attack is the latest in a series of Ukrainian strikes this month, which, according to Reuters’ calculations, have resulted in the closure of 7% of total refining capacity, exacerbated by unrelated maintenance issues.
