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Russia will slash crude exports from western ports by one-quarter in March and April, expanding the 500,000 barrel-per-day cuts it announced for next month in apparent retaliation for Western sanctions, Reuters reports.
Citing three sources in the Russian oil market, Reuters says that the plan to cut exports by up to one-quarter from Western ports goes beyond the 500,000 bpd production cut planned for March.
There is no confirmation of the reported 25% cut in exports from Western ports from Russian authorities, nor has Russia’s pipeline giant, Transneft, responded to Reuters’ requests for comment as of the time of writing.
When Russia announced the 500,000 bpd production cut for March, markets were largely unshaken, despite the drop in Russian seaborne crude exports already in place at the time.
Western sanctions are forcing Moscow to perform various oil market acrobatics, from output cuts and the creation of new pricing mechanisms for its flagship Urals crude to selling its crude to China and India at massive discounts.
At 12:15 p.m. EST on Wednesday, Brent crude was trading at $81.02, down 2.44% on the day, while WTI was trading at $74.35, down 2.63% on the day.
Russia’s original plans to cut production by 500,000 bpd in March would amount to 5% of Russia’s output or 0.5% of global production, based on Reuters data.
Cutting from Western ports reflects the diversion of Russian crude to eastern markets, primarily Indian and China, but also Turkey. The rerouting, however, has hit snags with refined products, which have been under Western sanctions since February 5th.
Western sanctions on December 5th and February 5th, along with the G7 price cap, are intended to reduce Putin’s access to oil revenues to finance his war against Ukraine.
According to U.S. Treasury officials, the decision to cut output in March does not reflect retaliation, as much as it reflects Moscow’s inability to sell its normal amount of oil, Reuters reports.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com
Yet, Russia announced in December after Western countries introduced the price cap that it won’t export oil to any countries implementing the cap and that it will cut production by 500,000 barrels a day (b/d) from March in retaliation against the cap.
In fact, Western sanctions, bans on Russian crude and petroleum products exports and the cap have failed miserably to even make the slightest dent on Russia’s exports and revenues.
The proof is that Russia exported in January 8.2 million barrels a day (mbd) of crude and petroleum products. This was higher than both its average 7.8 mbd exports in 2022 and its pre-Ukraine exports of 8.0 mbd by 5.1% and 2.5% respectively. This trend is continuing so far in 2023.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert