Oil prices rose on Friday after Russia’s deputy Prime Minister, Alexander Novak, said that his country would cut production in March by 500,000 barrels a day — or about 5 per cent of its output.
Russia is the world’s third-largest producer of oil, and the announcement by Novak, who is the Kremlin’s point person on energy, immediately sent prices upward before they eased slightly. Futures for Brent crude, the international benchmark, were 2.5 per cent higher, at $86.33 a barrel. West Texas Intermediate rose similarly, briefly rising above $80 a barrel.
Novak portrayed the move as one designed to hit back at the western price cap of $60 a barrel imposed on Russian oil in December. According to the Russian news agency Interfax, he said, “We will not sell oil to those who directly or indirectly adhere to the principles of the price cap,” a statement often repeated by Novak and President Vladimir V. Putin.
The production cut, Novak said, would “contribute to the restoration of market relations.” He also appeared to counter the idea that Russia is having trouble finding buyers for its crude. “Today, we are fully selling the entire volume of oil being produced,” Interfax quoted him saying.
But analysts said that the announcement could be an indication that Russia is worried about the increasing difficulties of selling its oil because of recently imposed sanctions.
“Russia might be feeling that more and more countries are going to start attempting to use the price cap scheme,” said Felix Todd, an analyst at Argus Media, a pricing data firm.
Novak may also be trying to raise the price Russia is receiving for its oil by limiting supplies. In recent weeks, there has been an abundance of Russian crude, giving buyers leverage to extract discounts of as much as $40 a barrel on Russia’s most important crude grade, Urals, according to Argus Media.