Oil pared an earlier decline as traders weighed a looming reduction in Russian supply with returning supplies elsewhere in the world.
(Bloomberg) — Oil pared an earlier decline as traders weighed a looming reduction in Russian supply with returning supplies elsewhere in the world.
West Texas Intermediate futures earlier lost as much as 1.6% before rebounding. Russia said Friday it would reduce output by half-a-million barrels a day. The decision led to a significant uptick in bullishness in the options market, while key gauges known as timespreads also firmed. The European Union said Russia was forced into the move.
Tanker loadings of Azeri oil at the Turkish port of Ceyhan resumed Sunday, ending a major supply disruption following last week’s devastating earthquake. Futures also fluctuated with the fortunes of wider markets, with the dollar erasing an earlier gain, coinciding with crude’s reversal.
Oil has had a choppy start to 2023, bouncing within a $10 band, as Russia’s almost yearlong war in Ukraine continues to affect the energy market, while China’s reopening after restrictive Covid curbs boosts the outlook for demand. In addition, there have been supply disruptions in Europe, adding to the concerns about the outlook for even tighter US monetary policy.
“Short-term fundamentals are rather neutral,” said Helge Andre Martinsen, senior oil analyst at DNB Bank ASA. “Russian production decline, China demand boost and shale growth capped by oil service-capacity constraints will tilt the market into undersupply with eroding spare capacity.”
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