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23 Dec, 2022 15:45

Russia warns of oil production cut

The reduction may come in response to the G7 price cap on the country’s crude exports, Deputy Prime Minister Aleksandr Novak says
Russia warns of oil production cut

Russia will not sell oil to countries that impose a price cap on its crude exports, Deputy Prime Minister Aleksandr Novak warned on Friday.

According to Novak, Moscow may respond by reducing oil production by 500,000-700,000 barrels a day in early 2023. Russia is the world’s third biggest oil producer and the cuts would equate to roughly 5-6% of the country’s daily output.

The G7 and EU’s $60-per-barrel ceiling on Russian seaborne crude came into force on December 5. The measure, along with a ban on EU imports of seaborne Russian flows, is aimed at curbing the Kremlin’s revenues. Russian oil cargoes that are traded above the threshold cannot access some key services from Western companies, including insurance.

“We are ready to partially cut our production early next year,” Novak warned in an interview with the Rossiya-24 TV channel.

“We’ll try to find some common ground with our counterparts to prevent such risks. But right now, we’d rather take a risk of a production cut than stick to the policy of selling in line with the threshold.”

The official described the potential production drop as “insignificant” [to Russia], reiterating that Moscow will not sell its crude to those who apply the Western price cap. Russian producers are able to reroute their exports to competing markets, including Asia, as the nation’s energy is still in high demand globally, Novak stressed.

On Thursday, President Vladimir Putin told reporters he will sign a decree on the nation’s response to the cap next week, which will feature “preventive measures.” 

Russia’s full-year oil production in 2022 will probably grow to 535 million tons, equivalent to around 10.74 million barrels per day (bpd), according to Novak. Data shows that in November, the country’s average daily output hit an eight-month high of 10.9 million bpd.

Meanwhile, experts have warned that an output cut by Russia could tighten the global energy market as demand in China, the world’s largest oil importer, is forecast to rebound.

For more stories on economy & finance visit RT's business section

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