Russian Deputy Prime Minister in charge of Energy, Alexander Novak, announced on Friday that Russia would lower its crude oil production in March by 500,000 barrels per day, or about 5% of its daily production.
“Russia will voluntarily cut production by 500,000 barrels per day in March”he said, quoted by Russian news agencies, as Moscow has been hit since December by the implementation of a price cap on its crude by the G7, the European Union and Australia.
Moscow has been hit since December by the establishment of a price ceiling on its crude oil by the G7, the European Union and Australia. These measures have also targeted refined petroleum products since early February.
The announced reduction of 500,000 barrels per day will represent a drop of about 5% of current daily Russian extractions, which total more than 9.5 million barrels.
The cut will come on top of the 2 million barrels per day production limit of the Organization of the Petroleum Exporting Countries and its partners (OPEC), which links Russia with Saudi Arabia and dozens of other producers, decided in order to support prices.
According to Russian presidential spokesman Dmitry Peskov, “there have been conversations with a number of OPEC members” before Moscow’s announcement.
And delegates from other OPEC members told the Bloomberg agency that they would not compensate for the drop in Russian production.
The fear of seeing the rough miss pushed up the price of black gold on Friday.
In London, Brent, the European benchmark for oil, rose at midday by 2.49% to 86.60 dollars, while the American WTI took 2.41% to 79.93 dollars.
“A short time ago, Russia was able to compensate for the loss of its sales to the West with purchases from Asia, particularly China and India”recalls Carsten Fritsch, an analyst at Commerzbank.
“However, price limitations have forced Russia to sell its production at a much lower price”which may explain its desire to boost the market, adds the analyst.
Despite Moscow’s assertion of a “unilateral decision”, “we believe the decision is not completely voluntary and that market factors are forcing Russia’s hand”which is struggling to find buyers, said Giovanni Staunovo, an analyst at UBS.
According to him, this drop in supply, even as demand could increase with the reopening of China, could push up the prices of black gold more durably.