MOSCOW (Reuters) – Russia will cut its oil output in March by 500,000 barrels a day, or about 5 percent of output, Deputy Prime Minister Alexander Novak said on Friday, after the West capped the price of oil and Russian petroleum products.
The European Union has banned purchases of Russian petroleum products and set price caps since February 5.
The G7, the EU and Australia had already decided in December to cap a barrel of Russian oil transported by sea at 60 dollars, to dry up Russia’s sources of income and limit its ability to finance its invasion of the ‘Ukraine.
“As of today, we are selling the entire volume of oil produced, however, as previously stated, we will not be selling oil to those who directly or indirectly adhere to the ‘price cap’ principles,” said Alexander Novak in a press release.
“In this regard, Russia will voluntarily reduce production by 500,000 barrels per day in March. This will help restore market relations,” he added.
The Kremlin said on Friday that Russia had held talks with some members of the broader group of OPEC+ producing countries regarding its decision to cut production.
Alexander Novak later indicated that Russia had not held formal consultations, the cuts being voluntary.
Two OPEC+ delegates told Reuters the group did not plan any particular action following Moscow’s decision.
IMPACT OF SANCTIONS
The announcement of a drop in production by Russia, the world’s second largest oil exporter behind Saudi Arabia, pushed up the price of a barrel of Brent crude and American light crude oil (WTI) by more than 2% on Friday.
As Russia tries to cope with the many sanctions imposed by Western countries to curb its oil revenues, the announcement of a reduction in oil production shows that these are starting to have an impact.
The last major drop in Russian oil production dates back to last April when it collapsed by almost 9% following the introduction of the first Western sanctions aimed at responding to Moscow’s offensive in Ukraine. .
Since then, Russia has managed to set up supply chains to export its oil, mainly to Asia. Last year, its oil production thus increased by 2% despite the sanctions, to reach 535 million tonnes (10.7 million barrels per day).
(Report by Vladimir Soldatkin and Olesya Astakhova in Moscow, Ahmad Ghaddar and Rowena Edwards in London, French version Dina Kartit, edited by Blandine Hénault)
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