Oil rose more than 8% in the week

Oil futures gained more than 8% last week after Russia announced a production cut on Friday and there were earthquake supply fears in Turkey and Syria.

US West Texas Intermediate (WTI) crude rose 8.63% on the week, its biggest weekly gain since October last year, closing Friday at $79.72 a barrel.

North Sea Brent rose 8.07% to $86.39 per barrel, while the Mexican export mix rose 6.21% to $69.92 per barrel.

The increase comes after two consecutive weeks of declines.

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Crude prices rallied more than 2% on Friday after Russia announced a 500,000-barrel-a-day production cut in response to Western restrictions on its oil.

According to analysts, the impact of the measure on oil prices was limited, since what will stop being produced represents a not very significant amount, in addition to the fact that a drop in the demand for fuels is expected in most parts of the world. in the world due to a slowdown in economic activity.

The cut announced by the Kremlin is equivalent to 5% of what Russia pumps in total daily and barely half a percentage of all daily production globally.

“Analysts have already calculated that Russian production will fall between 700,000 and 900,000 barrels in 2023,” Rebecca Babin, senior energy trader at CIBC Private Wealth US, told Reuters. “The key for crude to break out of its current trading range is the recovery of Chinese demand”

Since last year, the European Union has banned the import of Russian oil, in addition to the G7 applying a price cap, this with the aim of putting pressure on Moscow’s income in the midst of its military offensive against Ukraine.

The Russian government’s oil revenues fell nearly 50% in January from the same month last year, while its military spending rebounded 59%, Russia’s Finance Ministry reported last week.

The announcement of the production cut was interpreted as a sign that Russia is already resenting the sanctions. “In the short term, it doesn’t mean much as there is a major refinery maintenance program damping current demand, but as we move forward and global oil demand continues to recover, the supply shortfall widens,” said Andrew Lipow, President of consulting firm Lipow Oil Associates.

Gabriela Siller, director of Analysis at Banco Base, said that crude oil prices also benefited last week due to risks of reduced supply after the earthquake in Turkey and Syria.

The earthquake stopped the flows of oil from Iraq and Azerbaijan through the Turkish port of Ceyhan,” Siller said.

It added that crude prices were supported by greater optimism due to the recovery in demand from China after the end of the restrictions by the Covid-19, as well as a lower risk of recession in the United States after the latest employment figures. for January.

Oil companies benefit

The stocks of the world’s most valuable oil companies benefited from the recovery in international crude oil prices, although they were also boosted by good quarterly results.

Analysts explained that an increase in oil futures tends to translate into a rebound in the shares of companies in the sector, because it increases the expectation of sales.

The oil company that earned the most was the British BP, whose shares rose 15.21%, in what was the highest weekly return in more than two years.

While the rebound in oil prices helped their stocks, their rise came after they announced they would slow down oil and gas production this decade as part of their plan to reduce their carbon emissions.

Other oil companies that also gained on the stock market last week were: the American Exxon Mobil (+5.32%) and Chevron (+1.49%), the French TotalEnergies (+5.32%), the British Shell (+5.18%), as well as the Saudi state oil company, Aramco (+1.09%). (With information from Reuters)

sebastian.diaz@eleconomista.mx