An oil tanker is moored at the Sheskharis complex, part of Chernomortransneft JSC, a subsidiary of Transneft PJSC, in Novorossiysk, Russia last fall, one of the largest facilities for oil and petroleum products in southern Russia. Associated Press Photo
Oil prices edged up Friday as Russia announced plans to cut its production by 500,000 barrels a day starting next month, in retaliation for the price cap the United States and Europe are imposing on its fuel exports.
The move will effectively reduce Russia’s output by about 5 percent. It comes at a time when the Group of Seven nations are considering lowering the price cap to further pressure Russia to withdraw its forces from Ukraine.
The cut is relatively modest in the context of the global oil supply, but it signals that Russia could further reduce its output in the months to come.
“We regard the price cap on Russian oil and petroleum products as interference in market relations and continuation of the destructive energy policy of the collective West,” said a statement from Alexander Novak, the Russian deputy prime minister.
“It may not only provoke a decrease in investments in the oil sector and, consequently, an oil shortage, but can also be spread to other sectors of the global economy, with similar consequences, in the future,” Novak said. He said Russia’s determination not to sell any oil to countries imposing the price cap drove the decision to cut output.
The impact on gas prices globally is expected to be minimal.
The move comes as some buyers, such as China, have been purchasing large volumes of Russian oil, taking advantage of its low price. They have been able to purchase it for well below the $60-per-barrel cost permitted under the price cap recently imposed by the G-7.
Russia’s announcement Friday pushed global oil prices up, with futures for Brent crude, the global benchmark, rising 1.6 percent to $86 per barrel.
“In today’s action, Russia is firing its own crude weapon at the West,” said a note to clients Friday morning from ClearView Energy Partners, a research firm. It called the cut a “significant milestone” in the energy war touched off by Russia’s invasion of Ukraine and the sanctions that followed.
Further cuts, the firm wrote, could lead to tightness in the oil market, driving prices higher. ClearView wrote that “the Kremlin may be trying to get into the heads of European diplomats and G-7 price cap coalition members” as they consider lowering the price cap on Russian oil below $60 per barrel.
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