Oil prices ended the week higher on Friday on reports of a potential Russian output cut and were on track to post a weekly gain.
Brent, the benchmark for two-thirds of the world’s oil, ended trading 3.63 per cent higher to settle at $83.92 a barrel, while West Texas Intermediate, the gauge that tracks US crude, closed up 2.67 per cent at $79.56 a barrel.
Russia may cut its oil output by 500,000 barrels per day to 700,000 bpd in early 2023 as it responds to a price cap on its crude and oil products, Deputy Prime Minister Alexander Novak was quoted as saying by the RIA news agency.
The country plans to ban the supply of oil and related products to countries and legal entities that support the price ceiling, Mr Novak said.
On December 5, the EU and the Group of Seven advanced economies (G7) placed a price cap of $60 on global purchases of seaborne Russian crude.
The ceiling is intended to reduce Moscow’s oil and gas revenue, while maintaining adequate supplies of crude on the global energy market.
Russia, Europe’s top gas supplier and the world’s second-largest crude exporter, has continued selling discounted barrels to countries such as India and China since its invasion of Ukraine in February.
The country's oil exports rose in November before the introduction of the price cap.
Russia's oil exports increased by 270,000 bpd to 8.1 million bpd, the highest since April, as diesel exports surged by about 38 per cent to 1.1 million bpd, according to the International Energy Agency.
But its oil export revenue dropped by $700 million to $15.8 billion on lower crude prices and steeper discounts.
"There have been several bullish factors overall this week with the strong draw in US crude oil and distillate inventories, [and] the bump seen in Chinese domestic travel," Sudharsan Sarathy, an analyst at London Stock Exchange Group, told The National.
Brent rose about 2 per cent on Thursday on a larger-than-expected drop in US crude stocks. The benchmark was 1.5 per cent lower at $80.98 at the time of closing.
"The risk of interest rate hikes and the quick spurt in Covid-19 cases as China opened up are causes for concern and would continue to provide a cap on prices," said Mr Sarathy.
Covid-19 infections are soaring in China, the world’s second-largest economy and top crude importer, after the country reversed course on its zero-Covid policy earlier this month, raising concerns of a further slump in economic activity.
Earlier this week, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said the Opec+ alliance of 23 oil producers will remain “proactive” due to market volatility and concerns of a global recession.
“In face of a wide range of uncertainties, Opec+ has no choice but to be proactive and pre-emptive, and this is not an easy task, especially since the market has the tendency to overreact to news in both directions,” Prince Abdulaziz said in an interview with official news agency SPA.
At its December meeting, Opec+ stuck to existing production targets amid uncertainty over sanctions on Russian crude.
"The oil market is vulnerable to a couple of shocks that could keep the recent rebound going into the New Year," said Edward Moya, senior market analyst at Oanda.
“Opec+ should have an easy job over the next couple of months as they remain nimble and ready to adapt to whatever the trajectory appears to be for crude demand.
"WTI crude appears to have a floor at the $70 level and initial resistance at the $80 level, with major resistance at the $83.50 region."