Russia may cut its oil production in response to G-7 oil price cuts, President Vladimir Putin said. A decision on Moscow’s response will be announced by presidential decree within the next few days, Putin told reporters in comments broadcast by state-run Rossiya 24 television, without giving further details. “I’m not saying it’s a decision now, but if necessary, we’ll think about a possible production cut,” Putin said. “I have already said that we will simply not sell oil to those countries that participate in the price ceiling.
After months of planning and negotiations, the largest tranche of international sanctions against Russian oil went into effect on Monday. The European Union has banned almost all seaborne imports of oil into the country, and the G-7 has agreed that anyone wanting to access key services the bloc provides – notably insurance – will have to pay less than $60 a barrel.
There are still huge unanswered questions that will affect the impact of the measures on the oil market, including the depth of non-EU insurance markets, the appetite of some tanker owners to participate in trade with Russia and exactly how effective enforcement of the cap will be. may be.
“Whatever Russia does, there are no good options,” Ben Harris, assistant secretary for economic policy at the U.S. Treasury Department, said earlier this week. “Any disruption to supply will not only hurt their partners but also really hurt their wallets.”
Production, Sales
Russia said the effects of the price cap on oil production would be limited. Any volatility in the country’s output “will not be higher than fluctuations in the spring,” First Deputy Energy Minister Pavel Sorokin said earlier this week.
In April, two months after the invasion of Ukraine, Russia pumped an average of around 10.05 million barrels a day, down from 11.08 million barrels a day in February, according to industry data seen by Bloomberg. Production then began to recover, hitting an eight-month high in November.
The price cap will not have any negative consequences for Russian revenues, as the $60 per barrel limit imposed by Western countries “corresponds to the prices at which we sell today,” Putin said. “We’re already selling at around those prices, so don’t worry about the budget.”
Russia’s flagship Urals crude, which is exported from the Baltic port of Primorsk, was valued at $41.59 a barrel on Thursday, according to data from Argus Media, whose data the Russian government uses to calculate export duties. However, the price of Russia’s ESPO crude blend in Asia is holding well above the western ceiling, trading at $67.11 a barrel on Thursday, Argus data shows.
