Russia to cut oil production by 500,000 barrels per day in March

Russia is planning to decrease its oil output by 500,000 barrels per day in March, Deputy Prime Minister Alexander Novak said as quoted by TASS.

“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’. In light of this, Russia will voluntarily cut its oil production by 500,000 barrels per day in March,” Novak noted.

The senior official believes that this decision “will contribute to the restoration of market relations”.

At the same time, he noted that the “price cap” mechanism can lead to lower levels of investment in the oil sector and oil deficits. Moreover, Novak believes that this deficit can have a knock-on effect on other sectors of the economy.

The EU-imposed price cap on Russian oil ($60 per barrel) entered into force on 5 December. On 5 February, similar sanctions targeting Russia-origin petroleum products ($100 per barrel for high-quality products like diesel and $40 dollars for cheaper products like oil fuel) came into effect.

The US Treasury reported that Russia-origin petroleum products will not be subjected to the price cap if they are “substantially transformed” in third countries.

Moreover, the EU embargo and price cap on Russian petroleum products will not be applied if these fuels are produced from the Russian crude in other states.