Oil Inches Higher On U.S. President’s Day

Crude oil prices are gaining at the start of the week as sentiment shifts to the supply and demand picture after being weighed down last week by U.S. inflation data. 

On Monday at 1:50 p.m. EST, Brent crude was trading up 1.31% at $84.09 per barrel, up $1.09 on the day, while WTI was up 1.11% at $77.19, up 85 cents per barrel on the day. Volumes were subdued in Monday trading due to Presidents’ Day in the United States, a market holiday. 

Last week saw oil prices close 4% lower, but the outlook has somewhat improved, with the International Energy Agency (IEA) and OPEC both raising their 2023 demand outlooks due to expectations of a Chinese recovery. Also pushing prices higher is a continued focus on Russia, which announced a 500,000 bpd production cut for March, with many believing further cuts could be in the works.

Writing for the UAE’s National News, analyst Robin Mills warns that Russia’s oil sector could be in trouble due to sanctions and the Kremlin’s moves to squeeze more cash out of the industry, both of which could slow investment and have a devastating effect on the industry.

While Mills suggests that the March production cut is because Russia faces difficulties selling its crude and associated refined products, as well as accessing tankers for the long haul to China and India, due to the EU’s ban, it’s the slow decline and the longer term impact on the industry that should have Moscow worried.

“The Kremlin will attempt to extract more cash from the industry to fund its war — as it has already done by raising the price benchmark used for taxation and receiving a large special dividend from Gazprom. That and sanctions will eat away at the productive base over time,” Mills writes. 

By Charles Kennedy for Oilprice.com

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