Russia announced Friday that it will cut oil production by 500,000 barrels per day, or 5%, next month.
The announcement comes after Western nations capped the price of Russia’s crude amid sanctions over Russia’s invasion of Ukraine nearly a year ago.
“As of today…we will not sell oil to those who directly or indirectly adhere to the ‘price ceiling,’” Deputy Prime Minister Alexander Novak said in remarks carried by Russia’s news agencies.
As a result of Russia’s announcement, oil prices have risen by nearly 2%, with April’s delivery trading at $85.58 per barrel, jumping by $1.10 a barrel over Thursday’s closing price.
Last year, the European Union agreed to ban Russian seaborne imports of crude oil. An embargo on oil products including diesel kicked in earlier this week.
That embargo follows an announcement from the EU last Friday that it would unveil its 10th package of sanctions against Russia on February 24, marking one year of Russian aggression against Ukraine.
“Russia currently has a limited pool of buyers for its crudes and has likely found a ceiling to its export sales in the near term, primarily to China and India,” Alan Gelder, vice president of refining, chemicals and oil markets at Wood Mackenzie, told CNN.
Russia reportedly made the decision to reduce its output without consulting the OPEC+ producers, which include Saudi Arabia along with Russia. OPEC+ decided in October to cut output by 2 million barrels per day and has not adjusted that stance since.
It’s unclear how a decrease of 500,000 barrels per day will impact the global economy. The 2 million barrel cut by OPEC+ occurred only to see prices fall below $80 per barrel by December.
Russian natural gas exporter Gazprom has already cut off most of its supplies to Europe. And Europe did initially experience high natural gas prices, but has since managed replenish much of its lost Russian supply with fuel from other sources, including the U.S. and Qatar.
Natural gas prices have descended from all-time highs last summer. However, they’re still three times higher than before Russia’s invasion of Ukraine last February.
