The price of oil made a 180 degree turn and rose by as much as 2 percent on Thursday, following Russia's confirmation to cut back on its production, like what the rest of the Organization of the Petroleum Exporting Countries (OPEC) members have earlier agreed on, ahead of the cartel and its non-member allies' meeting next week, industry sources said.
Brent crude futures LCo1 rose by 1.3 percent or 75 cents from the previous, settling at $59.51 a barrel. US crude futures, on the other hand, increased by a whopping 2.3 percent or $1.16 to $51.45 a barrel, after hitting a weekly-record high of $52.20.
In what is supposed to be a continuous downward spiral that would rival that of the deepest drop since the financial crisis in 2008, prices of oil in November plunged to more than 20 percent in total, a report from Reuters said.
One of the apparent causes for such a steep decrease would be the steady increase of crude supply from the US. Furthermore, the US government has been incessantly calling and pressuring Saudi Arabia and its cohorts in the OPEC to reconsider cutting its production output.
However, just as crude futures slid nearly to $60 a barrel this month, things changed and prices rebounded just as Russia announced its plan to join the concerted effort by the OPEC and its other members, to cut output.
On Tuesday, the office of the Russian Energy Ministry held a conference on Tuesday with the executives of domestic oil producers, days before the upcoming OPEC gathering in Vienna, Austria.
People who claimed knowledge of the issue tipped the news agency that Moscow has indeed considered reducing its crude output. Although, it is yet to be known by how much or how quickly will the Russian producers implement such changes.
Regardless, market watchers have been expecting a reduction rate of 1 million barrels per day (bpd) from OPEC and its non-member allies.
Effects On Russian Economy
The report from TRT World said that much of the country's economy depends greatly on the global oil market. Forty percent of its total federal budget revenue comes from Russia's oil and gas exports.
Any considerable dip in prices has a direct impact on the Russian economy. This happened more than a few times between 2014 and 2016.
This year alone, the Russian economic situation was severely affected by the lowering oil prices between October and November which has already reached more than 30 percent.
As such, Moscow's decision to cut back its supply rate is therefore intuitive.
