Monitoring Desk
MOSCOW: Russian Deputy Prime Minister Alexander Novak said on Friday that the country would cut oil production by 500,000 barrels per day, or around 5 percent of output, in March after the Western countries imposed price caps on Russian oil products.
The price of Brent crude surged on the news of the output cut from Russia, the world’s second-largest oil exporter after Saudi Arabia, increasing by more than 2.5 percent daily to $86.6 per barrel.
“As of today, we are selling the entire volume of oil produced; however, as said earlier, we will not sell oil to those who directly or indirectly follow the principles of the ‘price cap,’” Novak said in a statement.
“In this regard, Russia will voluntarily cut production by 500,000 barrels per day in March. This will help in the restoration of market relations.”
Russia negotiated oil output cut with members of OPEC+
The Russian Presidency said on Friday that Russia had negotiated with some members of The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, regarding its decision to cut output.
Later, Novak said that Russia had not held any formal consultations as the oil cuts were voluntary.
OPEC+ delegates said that OPEC+ plans no action after Moscow announced oil output cuts.
As Russia navigates the tangle of restrictions that the Western countries have imposed in an attempt to choke off its oil revenue, the production cut shows that the price cap on Russian oil and oil products has had some impact.
The G7, the EU, and Australia agreed to ban the use of West-supplied maritime insurance, finance, and brokering for Russian seaborne oil priced over $60 per barrel from December 5 as part of Western sanctions on Russia over the conflict in Ukraine.
The European Union (EU) also banned purchases of Russian oil products and imposed price caps from February 5. In turn, Russia has banned all deals involving any application of the price cap mechanisms.
The last significant fall in Russian oil production was in April, when it collapsed by nearly 9 percent following the introduction of Western sanctions on Ukraine. Since then, Moscow has managed to set up logistic chains to sell its oil products, mainly in Asia.
