Oil price nears $85 a barrel amid potential shrink in Russian oil supply

Oil price rose on Friday on hopes that Russian crude oil supplies will drop.

Brent crude was up by 2.63 percent to $83.71 a barrel while US West Texas Intermediate (WTI) crude rose 2.09 percent to $79.11 a barrel. 

According to traders and Reuters calculations, Russia’s Baltic oil exports could fall by 20 percent in December from the previous month after the European Union and group of seven (G7) nations imposed sanctions and a price cap on Russian crude from December 5.

Russia may cut oil output by 5 percent to 7 percent in early 2023 as it responds to price caps on its crude and oil products by halting sales to the countries which support them, RIA, Russian state-owned news agency, quoted Alexander Novak, deputy prime minister, as saying on Friday.

Speaking on the development, Edward Moya, Oando analyst, told Reuters that oil prices are rising as energy traders watch Moscow’s reaction to Russia’s oil price cap.

“Crude prices are higher as energy traders focus on Moscow’s response to the price cap put on Russian oil and not so much the thousands of flight cancellations that will disrupt holiday travel,” Moya said.

Expectations that Russia will shrink oil supplies have helped offset concerns that US fuel demand growth could take a hit as looming Arctic storms threaten travel during the holiday season, Reuters said.

More than 4,400 US flights have been cancelled over a two-day period due to the winter storm, coinciding with a holiday travel season that some predict could be the busiest ever.

In Nigeria, citizens are currently grappling with a distribution crisis in petroleum products – a situation that oil marketers have linked to higher prices at private depots.

In filling stations across the country, queues for petrol have persisted for weeks even as some outlets have increased the price of the product.

Recently, Nigerian airlines warned that there will be major disruptions of flights due to persistent scarcity of aviation fuel, also known as jet-A1.

The scarcity, the airlines said, would force them to reschedule flights, leading to late operations and in extreme circumstances, to cancellations.

The Nigerian natural oil and gas suppliers association (NOGASA) believes that local refining would eliminate delays at depots and reduce the prices of petroleum products.