Oil rises after Russia says it could cut output due to price cap

(Representative image)

Oil prices rose by $2 per barrel on Friday after Moscow said it could cut crude output in response to the G7 price cap on Russian exports, putting the market on track for a second week of gains.

Brent crude was up by $2.02, or 2.5%, to $83 a barrel at 10:06 a.m. EDT (1506 GMT), while U.S. West Texas Intermediate (WTI) crude was at $79.72 a barrel, up $2.23, or 2.9%.

Russia may cut oil output by 5%-7% in early 2023 as it responds to price caps, the RIA news agency cited Deputy Prime Minister Alexander Novak as saying on Friday.

Russia's Baltic oil exports could fall by 20% in December from the previous month after the European Union and G7 nations imposed sanctions and a price cap on Russian crude from Dec. 5, according to traders and Reuters calculations.

A massive winter storm was cascading across a broad swath of the United States, forcing thousands of flight cancellations, confounding travelers' plans during what was expected to be a busy holiday season.

"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," OANDA analyst Edward Moya said.

On Thursday, benchmark oil prices fell as flights were scrapped. The storm could also upend motorists' plans to travel during Christmas and New Year's, but heating oil demand could rise due to the extreme weather.

"As U.S. crude oil inventories fall and winter storms hit the U.S., cold temperatures are expected to extend southward to Texas, Florida, and the Eastern states. Demand for heating oil will soar," Leon Li, an analyst at CMC Markets, said.