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Oil Prices Rise on Saudi, Russian Voluntary Production Cuts

A drilling rig in the Hasaba oil field, 150 kilometers north of Jubail Industrial City (Aramco website)
A drilling rig in the Hasaba oil field, 150 kilometers north of Jubail Industrial City (Aramco website)
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Oil Prices Rise on Saudi, Russian Voluntary Production Cuts

A drilling rig in the Hasaba oil field, 150 kilometers north of Jubail Industrial City (Aramco website)
A drilling rig in the Hasaba oil field, 150 kilometers north of Jubail Industrial City (Aramco website)

Oil prices rose on Tuesday after Saudi Arabia and Russia, the world's biggest oil exporters, deepened oil cuts on Monday.

Saudi Arabia said it would extend its voluntary oil output cut of one million barrels per day (bpd) for another month to include August, adding that the cut could be extended beyond that month.

Also, Russian Deputy Prime Minister Alexander Novak said Moscow would cut its oil exports by 500,000 barrels per day in August.

Ricardo Evangelista, an analyst at ActivTrades financial brokerage firm, attributed the rise in oil prices during Tuesday's session to market traders' optimism following Saudi Arabia's announcement of extending the decision to reduce oil production rates until August, in addition to the Russian cuts.

Speaking to Asharq Al-Awsat, he said that the future outlook for oil demand rates remains uncertain, clouded by the lingering uncertainty surrounding the global economic recovery.

Later, Algeria said it would cut oil output by an extra 20,000 barrels from Aug. 1-31 to support efforts by Saudi Arabia and Russia to balance and stabilise oil markets, its energy ministry said.

The voluntary cut will be on top of a 48,000 barrel reduction decided in April, it said.

Libyan Oil Minister Mohamed Oun said his country welcomed the Saudi decision which will have "positive impact on market balance between global producers, consumers, and on global economy".

Brent crude futures were up 0.6%, or 43 cents, at $75.84 a barrel by 11:52 a.m. EDT (1652 GMT). US West Texas Intermediate crude rose 0.6%, or 39 cents, to $71.03. During Friday's session, Brent 0.8% and WTI rose 1.1%.

"The kingdom's production for the month of August 2023 will be approximately 9 million barrels per day," Saudi state news agency SPA quoted an official source from the Ministry of Energy as saying.

"This additional voluntary cut comes to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets," the SPA official source was quoted as saying.

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US Treasury Targets Russia's Gazprombank with New Sanctions

FILE PHOTO: A bronze seal for the Department of the Treasury is shown at the US Treasury building in Washington, US, January 20, 2023. REUTERS/Kevin Lamarque/File Photo
FILE PHOTO: A bronze seal for the Department of the Treasury is shown at the US Treasury building in Washington, US, January 20, 2023. REUTERS/Kevin Lamarque/File Photo
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US Treasury Targets Russia's Gazprombank with New Sanctions

FILE PHOTO: A bronze seal for the Department of the Treasury is shown at the US Treasury building in Washington, US, January 20, 2023. REUTERS/Kevin Lamarque/File Photo
FILE PHOTO: A bronze seal for the Department of the Treasury is shown at the US Treasury building in Washington, US, January 20, 2023. REUTERS/Kevin Lamarque/File Photo

The United States imposed new sanctions on Russia's Gazprombank on Thursday, the Treasury Department said, as President Joe Biden steps up actions to punish Moscow for its invasion of Ukraine before he leaves office in January.
The move, which wields the department's most powerful sanctions tool, effectively kicks Gazprombank out of the US banking system, bans its trade with Americans and freezes its US assets, Reuters reported.
Gazprombank is one of Russia's largest banks and is partially owned by Kremlin-owned gas company Gazprom. Since Russia's invasion in February 2022, Ukraine has been urging the US to impose more sanctions on the bank, which receives payments for natural gas from Gazprom's customers in Europe.
The fresh sanctions come days after the Biden administration allowed Kyiv to use US ATACMS missiles to strike Russian territory. On Tuesday, Ukraine fired the weapons, the longest range missiles Washington has supplied for such attacks on Russia, on the war's 1,000th day.
The Treasury also imposed sanctions on 50 small-to-medium Russian banks to curtail the country's connections to the international financial system and prevent it from abusing it to pay for technology and equipment needed for the war. It warned that foreign financial institutions that maintain correspondent relationships with the targeted banks "entails significant sanctions risk."
"This sweeping action will make it harder for the Kremlin to evade US sanctions and fund and equip its military," Treasury Secretary Janet Yellen said. "We will continue to take decisive steps against any financial channels Russia uses to support its illegal and unprovoked war in Ukraine."
Gazprombank said Washington's latest move would not affect its operations. The Russian embassy in Washington did not respond to requests for comment.
Along with the sanctions, Treasury also issued two new general licenses authorizing US entities to wind down transactions involving Gazprombank, among other financial institutions, and to take steps to divest from debt or equity issued by Gazprombank.
Gazprombank is a conduit for Russia to purchase military materiel in its war against Ukraine, the Treasury said. The Russian government also uses the bank to pay its soldiers, including for combat bonuses, and to compensate the families of its soldiers killed in the war.
The administration believes the new sanctions improve Ukraine's position on the battlefield and ability to achieve a just peace, a source familiar with the matter said.
COLLATERAL IMPACT
While Gazprombank has been on the administration's radar for years, it has been seen as a last resort because of its focus on energy and the desire to avoid collateral impact on Europe, a Washington-based trade lawyer said.
"I think that the current administration is trying to put as much pressure and add as many sanctions as possible prior to January 20th to make it harder for the next administration to unwind," said the lawyer, Douglas Jacobson.
Officials in Slovakia and Hungary said they were studying the impacts of the new US sanctions.
Trump would have the power to remove the sanctions, which were imposed under an executive order by Biden, if he wants to take a different stance, Jacobson said.
After Russia's invasion in 2022, the Treasury placed debt and equity restrictions on 13 Russian firms, including Gazprombank, Sberbank and the Russian Agricultural Bank.
The US Treasury has also worked to provide Ukraine with funds from windfall proceeds of frozen Russian assets.