Russia’s oil output cuts aim to support prices, Putin says

Source: iStock

Russia’s pledge to cut its crude production is intended to support global oil prices, according to President Vladimir Putin.

“All our actions, including those related to voluntary production cuts, are connected with the need to support a certain price environment on global markets in contact with our partners in OPEC+,” Putin said at a meeting with his government via video-link on Wednesday. “In general, the situation is absolutely stable.”

Russia promised to reduce its crude production by 500,000 barrels a day in March from February levels and maintain the curbs for the rest of the year. Moscow initially said the move was retaliation for Western sanctions, including a price cap on its oil.

While Deputy Prime Minister Alexander Novak said Wednesday the nation reached the pledged curbs this month, Moscow continues to increase seaborne crude exports. Four-week average shipments from its ports rose again in the period to May 12 to the highest since Bloomberg began tracking them in detail at the start of 2022. Supplies to domestic refineries are only beginning to drop amid seasonal maintenance.

Market watchers have been skeptical about the level of Moscow’s reductions. The International Energy Agency said output cutbacks of 300,000 barrels a day are needed this month to reach the target. “Indeed, Russia may be boosting volumes to make up for lost revenue,” the Paris-based IEA said.

Some other nations from the Organization of Petroleum Exporting Countries, including de-facto leader Saudi Arabia, have followed Russia by making their own voluntary output cuts. Total OPEC+ curbs are set to remove 1.66 million barrels a day from the market from May.

The main idea of the cuts was to restore stability in the global market because OPEC and its allies saw a supply overhang at their last meeting in April, Novak said last month.

© 2023 Bloomberg L.P.

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