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.
“We will not sell oil to those who directly or indirectly adhere to ‘price cap’ principles,” Novak added, referring to Western sanctions.
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.
Objective for the sanctioning countries: to reduce as much as possible the oil windfall of Moscow, whose revenues finance its invasion of Ukraine, but without causing a shortage, and therefore a surge in the price of black gold, which would feed the already very high inflation around the world.
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.
Penalties circumvented
The disruption of Russian gas supplies to Europe, in the wake of the Kremlin’s invasion of Ukraine, sent energy prices soaring and then inflation, but the oil market is for the moment relatively unscathed, as the Europeans reorganized their supply.
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 new sanctions that came into effect on Sunday relate to Russian refined products, which were mainly purchased in Europe.
And Russian exporters could not take comfort in watching prices soar as, amid global recession fears, crude prices are trading below where they were a year ago, before the Russian invasion of China. ‘Ukraine.
The announcement of a drop in Russian production, however, gave a boost to prices. In London, Brent, the European benchmark for crude, climbed in the middle of the day by 2.49% to 86.60 dollars, while the American WTI took 2.41% to 79.93 dollars.
The decline in Russian production may indeed not be compensated by the other major oil-producing countries.
OPEC+ allies
Worried that crude buyers are on the verge of a recession, which would reduce demand and risk causing a surplus of oil on the market, the Organization of the Petroleum Exporting Countries and its partners (OPEC+), which associates Russia with Saudi Arabia and 21 other producing countries, decided to cut production by 2 million barrels per day.
According to Russian presidential spokesman Dmitry Peskov, “there were conversations with a number of OPEC+ members” ahead of Moscow’s announcement on Friday.
And delegates from other OPEC+ member countries told the Bloomberg agency that they would not compensate for the drop in Russian production.
The idea that Russia has voluntarily decided to produce less does not convince everyone, however: “We believe that the decision is not completely voluntary and that market factors are forcing Russia’s hand”, which is struggling to find buyers, said UBS analyst Giovanni Staunovo.
In both cases, the consequence remains the same: a rise in prices which, according to him, could be accentuated by the reopening of China and the increase in demand that it should lead to.