HOUSTON: Oil prices rose on Monday as the Russian government ordered producers to curb output as hostilities between Russia and Ukraine continued to hit the energy sector.
Brent crude futures climbed $1.20, or 1.4%, to $86.63 a barrel by 1202 ET (1602 GMT). U.S. crude futures gained $1.27, or 1.58%, to $81.90.
Both benchmarks have risen steadily this year, with Brent up nearly 11% and WTI about 12.5% by Friday’s close.
Prices have gained support on expectations that interest rates in major economies will come down by the summer.
Oil prices down on Gaza ceasefire talks
Moscow, meanwhile, has ordered companies to reduce oil output in the second quarter to meet a production target of 9 million barrels per day (bpd) by the end of June, in line with its pledges to the producer group OPEC+, three industry sources said on Monday.
“Russia is committed to the OPEC+ cuts. They are looking beyond the current supply and demand fundamentals and looking at unity with OPEC+, as well as the risk of a bigger price shock further down the road” said Phil Flynn, analyst at Price Futures Group.
Attacks on Russian energy facilities and Ukrainian energy infrastructure, as well as fading hopes of a ceasefire in the Israel-Hamas conflict, have also stoked supply concerns, said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
Another Russian oil refinery had half of its capacity knocked out in a drone attack over the weekend, sources told Reuters. It was the latest casualty from a string of attacks by Ukraine this month that have shuttered 7% of total refining capacity, Reuters calculations show, on top of unrelated maintenance.
Russia attacked Ukrainian generating and transmission facilities last week and over the weekend, causing blackouts in many regions.
In the Middle East, Israeli forces pressed on with their offensive in Gaza on Sunday, with U.S.-backed mediation by Qatar and Egypt having failed to secure agreement between Israel and Hamas on a ceasefire.
Elsewhere, U.S. forces engaged six Houthi unmanned aerial vehicles over the southern Red Sea after the group launched four missiles toward a Chinese-owned oil tanker, U.S. Central Command said on Saturday.
Oil demand forecasts for 2024 have received modest upgrades, but OPEC has retained its supply curbs, said Tamas Varga of oil broker PVM.
This has created a significant buffer that can be used in case of a genuine supply shortage, a key element when arguing against a sustained Brent rally above $90 a barrel, he said.
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