Russia said Friday it would cut oil production by 500,000 barrels a day in retaliation for Western sanctions on its crude and refined oil exports, which came into full force earlier this week.
The cuts amount to roughly 5% of the country’s total exports for January.
WHITE HOUSE DENIES REPORT THAT US BLEW UP NORD STREAM PIPELINES
Oil prices jumped following the news, with futures for the international benchmark Brent crude at least 2.2% higher, up to $86.34 a barrel by the early mid-morning.
Delegates for OPEC+, the group of oil-producing nations and Russia, told Reuters that they were aware of Russia’s planned cuts and did not plan to raise their production output targets on the news.
Russia has repeatedly threatened to cut production in the months since G-7 leaders announced plans for a two-part price cap, which prohibits Moscow from shipping its crude oil above $60 per barrel and refined premium petroleum products above $100 per barrel.
The cap is designed to keep Russian products on the market while depriving Russian President Vladimir Putin of his revenue funding the war in Ukraine.
The cap on refined products took effect five days ago, alongside the EU’s ban on Russian refined petroleum imports.
“Russia believes that the mechanism of price caps on Russian oil and petroleum products is an intervention in market relations and an extension of destructive energy policies of the collective West,” Russian Deputy Prime Minister Alexander Novak said in a statement.
“As of today, we are fully selling the entire volume of oil produced; however, as stated earlier, we will not sell oil to those who directly or indirectly adhere to the principles of the ‘price cap,'” he added.
But many analysts said the cuts are less an act of retaliation from Moscow and more a quiet acknowledgment that it is struggling to reroute its supplies as both the European Union import ban and oil price cap take full force.
Russia also has limited domestic storage space, meaning it cannot continue to produce at much of a surplus as it looks to find new buyers.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
One official with the G-7-backed price cap coalition told the Washington Examiner that despite Russia’s claims, reporting has shown that a “significant amount” of Russian seaborne oil has been shipped via price cap-compliant tankers, highlighting the efficacy of the cap in keeping Russia’s supplies on the market while also driving down its oil revenue.
This person also noted that since the G-7 and its price cap partners have largely banned imports of Russian oil and Russian refined products, the bulk of Moscow’s new production cuts will be disproportionately felt by developing countries rather than the countries that passed the punitive measures.
