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The Russian oil price cap mechanism is still meeting its objectives, a G7 price cap coalition official told Reuters on Friday.
Any Russian production cuts that may be forthcoming will disproportionately hurt developing countries, the G7 official added.
Earlier on Friday, Russia announced a 500,000 bpd crude oil production cut—crude oil production, not crude oil and condensate production—with Russia’s Deputy Prime Minister Alexander Novak preceeding that with a warning that there was a risk of reduced crude oil production yet this year directly as a result of the EU import bans and the G7 price caps on its crude oil and crude oil products.
The G7 official cautioned, however, against the veracity of Russia’s reports of oil production cuts.
Up until this week, it had been widely reported that Russia’s crude oil production and exports were holding fast in the fact of the bans and price caps, with the Russian Ministry reporting 9.8-9.9 million bpd last month—a close match to November and December figures despite the new measures designed to punish Russia for its military operations in Ukraine.
The discount for Russian Urals crude oil has dropped to $30 per barrel below the international Brent crude oil benchmark, with Russia’s budget sinking into a deficit in January. An oil production cut on behalf of Russia could boost the Brent benchmark, inadvertently boosting Urals pricing too. The Kremlin said that it had talked with some OPEC+ members regarding its decision to cut oil production, but two OPEC+ delegates told Reuters that OPEC+ had no plans to cut production.
So far, Russia has been able to find willing buyers in the Asian market for its crude oil, largely in defiance of Western sanctions.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.