Oil Edges Lower as Slowdown Concerns Vie With Russian Cutback

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(Bloomberg) — Oil edged lower as concerns about slowing global growth offset Russia’s plan to curb supply in retaliation for western sanctions.

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West Texas Intermediate fell toward $79 a barrel after soaring by more than 8% last week. Although Moscow will reduce supply by half a million barrels from March as curbs on flows tighten, investors remain wary that the Federal Reserve needs to keep pushing interest rates higher to tame inflation. The Fed’s drive has weighed on appetite for risk assets including commodities.

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The White House said Russia’s plan to slash oil output, which was announced on Friday, showed the extent to which President Vladimir Putin is willing to use resources like energy as a weapon. Despite the move, Moscow’s partners in the OPEC+ coalition signaled they won’t boost production to fill in for the cutback. 

Oil has had a bumpy start to 2023 as investors contend with the continued fallout for the energy market from the war in Ukraine, as well as the impact from China’s reopening after Covid Zero curbs were dropped. Last week, Saudi Arabia raised prices for Asian buyers, signaling it’s optimistic about demand. In addition, there have been a host of minor supply disruptions in Europe.

Investors have been reassessing prospects for how much higher US borrowing costs will likely go this year after a run of robust data, coupled with Fed policymakers warning that there’s scope for further tightening. Inflation figures due on Tuesday will shape the next stage of that debate.