Russia “voluntarily” reduces its crude production by 500,000 bd in March

Russia will reduce “voluntarily” oil production at 500,000 barrels per day (bd) in March after the cap imposed by the G7, Australia and the European Union (EU) to Russian crude oil and derivatives for its “military campaign” in Ukraine.

“Today we are fully selling the entire volume of oil produced, however, as stated above, we will not sell oil to those who directly or indirectly adhere to the maximum price principle.”, Deputy Prime Minister Alexander Novak told local media, according to the official TASS agency.

“In this sense, Russia will voluntarily reduce production by 500,000 bd in March. This will help restore market relations.” said the person in charge of the country’s energy policy and the negotiations with the OPEC+ alliance.

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The Deputy Prime Minister recalled that Russia is considering the mechanism of caps on Russian crude and oil derivatives “an interference in market relations and a continuation of the destructive energy policy of Western countries.”

“In the future, it may not only lead to a decline in investment in the oil sector and consequently to a shortage of oil, but it will also spread to other sectors of the world economy with similar consequences,” Novak warned.

He also said that Russia, when making further decisions, will take into account the current market situation.

Novak himself recently stated that oil production in Russia, despite the sanctions imposed, has remained stable in recent months, at a level of 9.8-9.9 million bd.

The Deputy Prime Minister emphasized that in February the volumes remain at the same level, but there are also risks of decreased production.

The Western cap on Russian oil was introduced last December and sets a maximum price of $60 per barrel. In addition, on February 5 another cap on Russian oil products entered into force of $100 per barrel for products that are sold at a premium (gasoline and diesel) and $45 for derivatives that are sold at a discount over oil.

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The Kremlin responded with a decree by President Vladimir Putin, which took effect on February 1, banning the sale of Russian crude at a ceiling price, although the president can make exceptions based on a special decision.

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The governor of the Central Bank of Russia (BCR), Elvira Nabiúlina, said in a press conference after the board of directors this Friday that the entity will monitor the impact that the decision announced today by Novak has on oil prices.

“We have clarified the impact of sanctions on oil. The adjustment in the Russian oil sector in December-January was due to lower prices, not volume cuts. Today the government announced a voluntary cut in Russian production of 500,000 barrels per day starting in March. We will monitor the impact of these decisions on the dynamics of oil prices.”he pointed.

Nabiúlina pointed out that compared to the last review of the BCR in October, the Central Bank’s forecast for oil prices for 2023 has been reduced.

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Thus, the BCR lowered the forecast for the Urals oil price for 2023 to 55 dollars a barrel, compared to expectations of 70 dollars published in October.

At the same time, the Central Bank will take into account that the actual average price of Russian oil and the forecast may differ from the Ural prices.

He stressed that the St. Petersburg International Commodity and Raw Materials Exchange is currently working on creating a suitable benchmark.

Source: EFE