Russian President Vladimir Putin said on Friday (9th) that Russia will announce reductions in oil production in the next few days in response to the price cap system imposed by the Group of Seven Industrial Countries (G7) on Russian oil.
In an interview with state broadcaster Rossiya 24 TV, Putin said he would issue a presidential decree in the coming days in response to G7 sanctions on Russia.
Russia and other oil exporters have production agreements with members of the allied group (OPEC+), so output cuts are only a possibility, he said.
Putin said: “I am not talking about the decision that has been taken, but if necessary, we will consider possible production cuts. I have already said that we will not sell oil to these (participating in the price cap) countries.”
After months of planning and negotiation, the most powerful international sanctions against Russia so far finally took effect on the 5th of this month. The European Union bans nearly all Russian oil by sea, and the G7 agrees that anyone who wants its vital services, such as insurance, must buy Russian oil for less than $60 a barrel.
White House spokesman John Kirby said that while Putin’s threat had been anticipated, the final actions of the Russian authorities still needed to be closely watched.
The impact of this wave of sanctions from Western countries on the oil market is difficult to assess, because there is no clear picture of the depth of the non-European insurance market, the appetite of tanker owners for Russian oil transactions, and the effectiveness of the oil price cap. Answer. Ben Harris, assistant secretary of economic policy at the U.S. Treasury Department, said recently: “No matter what Russia does, there are no good options. Supply disruptions not only hurt their trading partners, but also their income.”
Russia has said that the impact of the price cap on Russian oil production will be limited and that any changes in production will not exceed the magnitude of this spring.
Russia’s oil production averaged 10.05 million bpd in April, two months after Russia invaded Ukraine, down from 11.08 million bpd in February, but has since picked up and hit an eight-month high in November.
Putin also said the price cap would not have a negative impact on Russian treasury revenues because the $60-a-barrel threshold “is in line with the current price at which Russia sells oil.”
Russia’s mainstay Ural crude was estimated at $41.59 a barrel on Thursday, but Russia’s ESPO blend, which sells to Asia, was much higher at $67.11 a barrel on Thursday, according to Argus Media. Russia counts export tariffs based on the agency’s data.
