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Russia will reduce the amount of oil it ships to the market by half a million barrels per day, the Russian energy ministry said on Friday—this is in addition to the earlier assumed commitments of its voluntary production cut.

"Russia confirms it will reduce supplies to oil markets by 500,000 barrels per day in August through lowering of exports. It means taking all the requisite measures to achieve this goal within the framework of the voluntary reduction. This reduction complements the voluntary decrease Russia announced earlier and which was extended until the end of December 2024," the Energy Ministry said in a statement on Friday, according to TASS.

Russian Deputy Prime Minister Alexander Novak said earlier that Russia had voluntarily agreed to cut oil supplies to the market by half a million barrels per day in August by cutting exports.

"As part of the efforts to ensure a balanced market, Russia will voluntarily reduce its oil supply in August by 500,000 barrels per day by cutting its exports to global markets by that quantity," Russia's Deputy Prime Minister and top OPEC negotiator Alexander Novak said earlier this week, adding that the cut in exports would lead to a cut in production.

The export cuts come as Brent crude oil prices climb over $78 per barrel. The price of Russian ESPO crude, which goes to China, rose to the highest in seven months earlier this week as Chinese buyers rushed to buy it ahead of an announced 500,000-bpd cut in exports next month. Earlier this week, ESPO was trading at a $4 per barrel discount to Brent crude, or $6 per barrel above the G7 price cap—and that was before today's $2 Brent price increase.

Oil prices are on course for a second consecutive weekly gain, with WTI trading above $72 and Brent moving toward the $77 mark.

Recent inventory data from the United States has helped alleviate some demand concerns, with the EIA reporting a third draw in a row.

On the supply side, Russia’s decision to cut its oil exports combined with Saudi Arabia’s production cut extension are set to tighten the oil market.

Crude oil prices were set for their second consecutive week of gains today as supply concerns began to seep through a preoccupation with demand.

The latest inventory data from the United States helped alleviate concerns about demand, according to Reuters, as the EIA reported a larger-than-expected draw. Even though it was much slimmer than the inventory draw estimated for the previous week, which came in at 9.6 million barrels.

Yet last week’s inventory draw was the third in a row, strengthening the impression of a stronger demand environment in the world’s largest consumer of crude oil.

Meanwhile, minutes from the Fed’s meeting from last month revealed that the U.S. central bank is still determined to continue raising interest rates until it is satisfied with inflation levels. That’s bearish for oil but it seems supply news is countering the effect for the moment.

In related news, the FT reported that U.S. borrowing costs had jumped to the highest in 16 years as employment strengthened further. That, the FT noted, would likely strengthen the Fed’s resolve for more rate hikes.

“The global economy will break eventually, and the higher rates go, the bigger the cracks will be,” an Allianz bond fund portfolio manager warned.

Meanwhile in oil, "The crude demand outlook is starting to look better as we enter peak summer travel in the U.S., and as the Saudis were able to raise prices to Europe and Asia," OANDA analyst Edward Moya told Reuters.

The outlook for supply is helping support a less bearish view on oil prices, after the news about Saudi Arabia’s production cut extension and Russia’s planned export cuts began to sink in.

The two measures would take 1.5 million bpd off the market in August at a time when growth in production in the U.S. is slowing down and about to reverse later in the year, at least according to Reuters’ John Kemp.

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