In February, Russia declared its plan to reduce oil production by 500kb/d in March due to the price caps imposed by the West on Russian oil and oil products. However, implementing this pledge was only partially done during the spring. Therefore, the announcement made by Russia in early July to further decrease oil exports by another 500kb/d in August was viewed with doubt by the oil markets. But recently, evidence and visible supply suggested Russia has been more compliant in July.

Crude prices increased by almost 3% after Deputy Prime Minister Novak of Russia said they would reduce oil exports by 300kb/d in September, which suggests a total cut of 0.8mb/d compared to February levels. Saudi Arabia also shared that they will continue their 1mb/d cut through September and may make it deeper and longer.

The amount by which Russia reduces its oil production as promised will significantly impact the size of deficits in the upcoming months and where prices will settle.

Assuming Russia reduces its output by an additional 500kb/d, we predict that Brent could shift slightly higher than our presumed OPEC sweet spot of Brent $90 per barrel, primarily if OPEC fulfils these pledges.