Moscow will cut oil production from March in response to the EU and G7’s price cap on Russian crude. This was announced by Deputy Prime Minister Alexander Novak. An announcement following the rise in Brent, the international index that determines the price of black gold not only in Russia but around the world. The Kremlin’s move therefore brought back fears of a new rise in energy prices and inflation. The strategy is said to work, however, provided that is Vladimir Putin’s goal.
¨What is known for now is that starting from March, Russian oil production will be reduced by 500,000 barrels per day, equivalent to 5% of national production and 0.5% of world production. In clear reference to Western sanctions (embargo and price cap) targeting both crude oil and refined products from Russia since the beginning of February, Novak said he was confident the cut would help “restore market relations”. Overseeing Moscow’s ties with the OPEC+ group of oil producers, Novak warned that the sanctions could backfire against the United States and Europe, which describes their energy policy as “destructive”.
After the announcement, the Brent index rose 2.3% to $86.43 a barrel. However, it is still far from the record $139 recorded at the beginning of the Ukrainian invasion. The Financial Times writes that, according to several industry analysts, the experience of gas returning to gradually lower prices after a summer fire will show that Putin has “lost the energy war.” And this production cut may be more of a sign of desperation than a real threat to the West.
Ural, Russia’s largest crude oil export, is currently trading at well below $60 a barrel to find new buyers in Asia. A price below the ceiling price set by the EU and the USA. According to Christyan Malek, JPMorgan’s head of global energy strategy, Russia wants to “make sure the market is not overstocked” in order to raise prices and profit margins. OPEC+, the powerful organization of major oil producing Asian, African and South American countries, may not be an obstacle to Putin’s moves. Just last year, Saudi Arabia, the de facto leader of OPEC+, infuriated the United States for refusing to increase oil production and lower prices.
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
