Russia will cut oil output by 500,000 barrels a day, or about 5 percent, in March, Deputy Prime Minister Alexander Novak said on Friday, after the West imposed price caps on Russian oil and oil products.
Brent crude rose more than 2.5 percent to $86.6 a barrel on news of production cuts by Russia, the world’s second-biggest oil exporter after Saudi Arabia.
Novak said in a statement, “As of today, we are fully selling the entire amount of oil produced, however, as previously stated, we will not sell oil to those who directly or indirectly adhere to the ‘price ceiling’ principles,” Novak said in a statement. .
“In this regard, Russia will voluntarily cut production by 500,000 barrels per day in March. This will help restore market relations.
The Kremlin said on Friday that Russia had discussed its decision to cut production with some members of the OPEC+ producers group.
A Russian government source told Reuters earlier on Friday that it had not formally consulted with the OPEC+ group.
As Russia navigates the maze of sanctions that the West has imposed in an attempt to curb its oil revenues, the production cuts indicate that the price ceiling is having some effect on Russian oil products. has happened
The G7, the European Union and Australia agreed from December to ban the use of Western-provided maritime insurance, finance and brokerage for offshore Russian oil priced above $60 a barrel. 5 as part of Western sanctions on Moscow over the Ukraine conflict.
The European Union also banned the purchase of Russian oil products and set a price ceiling from February. 5. In turn, Russia has banned deals involving any application of the price cap mechanism.
Output Cut
The last major drop in Russian oil output was in April, when it fell by nearly 9 percent after Western sanctions were imposed on Ukraine. Since then, Russia has been able to establish a logistics chain for selling its oil, mostly in Asia.
Russia’s decision to cut oil production was announced just nine days after the OPEC+ panel, of which Russia is a member, endorsed the oil-producing group’s current production policy, which would allow for output cuts over the past year. It was agreed.
“Russia believes that the ‘price ceiling’ mechanism in the sale of Russian oil and oil products is an intervention in market relations and a continuation of the destructive energy policy of the countries of the collective West,” Novak said.
His spokesman later said the cuts would only apply to crude oil, without gas condensate, a type of light oil.
Russia’s oil output defied many forecasts of a decline last year, rising 2% to 535 million tonnes (10.7 million bpd) thanks to increased sales to Asia, particularly India and China. happened
However, following new sanctions from the West, Russia faces further challenges in oil sales, a key source of revenue for the state budget, which posted a $25 billion deficit in January.
Lower export volumes reduced Russia’s current account surplus by 58.2 percent to $8 billion in January, at a time when Moscow is ramping up budget spending.