London
CNN
—
Russia will cut crude oil production half a million barrels a day starting in March, more than two months after the world’s major economies imposed price ceilings on the country’s seaborne exports.
“We will not sell oil to those who directly or indirectly adhere to the principles of price ceilings,” Russian Deputy Prime Minister Alexander Novak said in a statement. “In this regard, Russia will voluntarily reduce production by 500,000 barrels per day in March. This will contribute to the restoration of market relations.”
The cut is equivalent to about 5% of Russia’s oil production.
Futures for Brent crude, the global benchmark, rose 2.7% on Friday to $86 a barrel as traders predicted a tightening of global supply. US oil rose 1% to trade at $79 a barrel.
In June last year, the European Union agreed gradually eliminated all Russian crude oil imports by sea for the next six months as part of unprecedented Western sanctions aimed at reducing Moscow’s ability to finance the war in Ukraine.
Reduced Russian oil supplies means more competition for barrels from other sources, such as the Middle East, that Europe, the UK and other Western countries currently need.
In a move to further tighten rules, the G7 countries and the European Union agreed in December to limit the rates at which Western brokers, insurers and shippers can deliver. Russian seaborne oil services. for markets elsewhere in $60 a barrel. Earlier this month, EU countries also banned imports Russian diesel and imported refined oil.
Novak warned that capping crude oil prices could lead to “a decrease in investment in the oil sector and, accordingly, a shortage of oil”.
Neil Crosby, a senior analyst at oil data firm OilX, told CNN that the 500,000 bpd cut is not a “worst case scenario” and remains a smaller impact on production. of Russia than most analysts expected last year.
“But it sets a precedent for further cuts if necessary or desired by the Russian authorities,” Crosby said, adding that Moscow may have trouble finding enough demand for its crude oil. me.
Russia’s Urals crude traded at $28 a barrel lower than Brent crude on Friday. In the past few months, India and China have grabbed cheap oil from Moscow, like the EU – once Russia’s biggest customer for crude oil – has stopped all imports.
“Russia currently has a limited number of buyers for crude oil and is likely to hit a ceiling on export sales in the near-term,” said Alan Gelder, vice president of refining, chemicals and oil markets at Wood Mackenzie. , mainly to China and India”. .
Based on ReutersRussia made the decision to reduce production without consulting the OPEC+ . group of manufacturers, including Saudi Arabia. OPEC+ decided to cut output by 2 million barrels per day in October and has not adjusted that stance since.
Reduce A potential drop in global oil provide will may come at a difficult time. China’s swift reopening of its economy in December after nearly three years of strict coronavirus restrictions pushed up estimates of global oil demand.
Last month, the International Energy Agency said it expected global demand to grow by 1.9 million barrels per day to hit an all-time high was 101.7 million barrels per day, with China accounting for almost half of the increase.
Western sanctions – added to the cost of war – are consider Russian economy. The country’s budget deficit spiked to $45 billion last year, or 2.3% of gross domestic product.
But Russia’s central bank left its key interest rate unchanged at 7.5% on Friday, saying economic activity was better than expected and inflation was likely to ease this year.
