Russia to Cut Oil Production by 500,000 Barrels a Day, Impacting Global Energy Market
By In response to the latest round of Western sanctions and price caps imposed on Russian oil and oil products, Russia has announced that it will reduce its oil production by 500,000 barrels a day starting in March.[0] This amounts to around 5% of its current production and is expected to have a significant effect on the global energy market.
The G7 nations and the European Union have introduced price caps on Russian oil and petroleum products in order to limit the Kremlin's ability to finance its war machine and prevent any massive spike in prices when their economies are struggling with high inflation.[1] The price caps include a $45 per barrel discount to crude Russian Petroleum (e.g., fuel oil and naphtha) and a $100 per barrel premium to crude Russian Petroleum (principally diesel).[2] Each of the policies also contains safe harbor provisions and a few limited authorizations, requiring certain parties to keep records and make specific attestations to avoid liability.[2]
Russia's oil production has remained resilient in the face of unprecedented Western sanctions in response to Moscow's invasion of Ukraine. Last year, Russian oil production rose by 2% to 10.7 million barrels per day as the nation successfully rerouted oil shunned by the West to other countries, mostly in Asia.
The 500,000 barrel-per-day reduction in production, which is set to take effect in March, is expected to have a significant impact on the global energy market. Energy stocks have already responded positively to the news, with Exxon Mobil stock retaking a buy point.
0. “Is Russia weaponizing oil after natural gas misfire?” DW (English), 16 Feb. 2023, https://www.dw.com/en/is-russia-weaponizing-oil-after-natural-gas-misfire/a-64721871
1. “Exxon Mobil Stock Breaks Out On Russia's 500000 Barrel Threat | Investor's Business Daily” Investor's Business Daily, 10 Feb. 2023, https://www.investors.com/news/exxon-mobil-stock-breaks-out-on-russias-500000-barrel-threat/
2. “G7 Nations Set Two Additional Price Caps Related to the Maritime Transport of Petroleum Products of Russian Origin” JD Supra, 13 Feb. 2023, https://www.jdsupra.com/legalnews/g7-nations-set-two-additional-price-9833557/
