(New York) Russia will reduce its oil production in March in response to the sanctions decided against its crude oil, its deputy prime minister announced on Friday, causing a jump in the price of black gold.
“Russia will voluntarily reduce its production by 500,000 barrels per day in March”, or about 5% of its daily production, said Alexander Novak, quoted by Russian news agencies.
The official had already mentioned, at the end of December, the possibility of a drop of 500,000 to 700,000 barrels per day, due to the entry into force of the European Union embargo on Russian oil, associated with the introduction of a ceiling price on deliveries to other destinations.
After crude oil in early December, the embargo was extended to refined products on Sunday.
For Andrew Lebow, of Commodity Research Group, the decision is linked to a lack of outlets for Russian oil due to the embargo and the price ceiling, but Moscow wants, despite everything, to give the impression of keeping control.
“We believe that the decision is not completely voluntary and that market factors are forcing Russia’s hand”, which is struggling to find buyers, also believes Giovanni Staunovo, analyst at UBS.
Along with the United States and Saudi Arabia, Russia is one of the three largest crude oil producers and therefore a crucial player in the market.
Until the entry into force of the new sanctions, “Russia managed to compensate for the loss of its sales to the West by purchases from Asia, particularly China and India”, notes Carsten Fritsch, analyst at Commerzbank.
But the embargo that came into effect on Sunday concerns Russian refined products, which were mainly purchased in Europe.
OPEC+ will not compensate
By promising Friday to deprive the market of 0.5% of global daily production, Russia has sparked prices.
The price of a barrel of Brent from the North Sea for April delivery gained 2.23%, to close at $86.39, while the American West Texas Intermediate (WTI), with March maturity, appreciated 2.12% to $79.72.
According to Russian presidential spokesman Dmitry Peskov, “there have been conversations with a number of members of OPEC”, the Organization of the Petroleum Exporting Countries (OPEC) and its allies of the agreement OPEC +, before the announcement made by Moscow on Friday.
And delegates from other OPEC+ member countries told the Bloomberg agency that they would not compensate for the drop in Russian production.
“Why would they? asked Andrew Lebow. “Prices will go up without them having to do anything. It is a risk-free operation for them. »
The cartel has indeed been under pressure since its decision, announced in early October, to reduce its volumes by 2 million barrels per day from November.
Prices are currently at a lower level than last year at the same time, a few days before the invasion of Ukraine, recalls the analyst.
“In my opinion,” he continues, “OPEC would prefer to see prices between $90 and $100” for Brent, “so there is no reason for them to increase production” to neutralize the drop in Russian production.
“The momentum given by China, the end of the use of strategic reserves by the United States and the contraction of Russian production plead for an ascent of Brent towards 90 dollars”, estimated, in a note, Edward Moya. , from Oanda.
However, Andrew Lebow does not see “the market getting carried away”, because demand, whether for crude oil or petroleum products, remains anemic in the United States and soft in Europe.
In addition, according to Daniel Ghali, of TD Securities, “most operators had already factored in the prospect of a drop in Russian production in the wake of the new sanctions”.