Jan 2, 2023
A senior Russian official has suggested that the country may reduce oil production by 5-7 percent in early 2023. It will also stop supplies to nations that support a price ceiling on its crude and oil products.
State television said that Deputy Prime Minister Alexander Novak estimated the cuts at between 500,000 and 700,000 barrels per day.
His comments represented Russia’s first detailed reaction to the price caps imposed on Russian energy exports. They were set by Western friends of Ukraine in retaliation to Moscow’s invasion of its neighbor.
Last December 5, the EU, G7, and Australia imposed a cap on the price of Russian oil at $60 per barrel. Along with the European Union’s ban on maritime imports of Russian crude oil, the United States, Canada, Japan, and the United Kingdom also made commitments to limit their own imports at current prices.
The European Union has also imposed price controls on gasoline.
The goal of these actions is to reduce Russia’s financial resources without causing an interruption in vital energy exports.
However, Novak warned that Moscow will cut off oil and oil product exports to nations participating in the price cap and firms that insist on its compliance.
It would require such countries to find alternative sources of their oil.
However, the overall amount of crude on the market would decrease if Moscow also decreased output as Novak promised.
Ultimately, this would hurt people worldwide by driving up the price of oil that doesn’t come from Russia. This might also give the Kremlin an advantage in negotiations with Western powers.
Novak indicated that Russia is willing to bear the risk of reduced production right now rather than follow the selling policy about price caps.
For instance, while $60 may seem like a lot right now, tomorrow, it might be anything. Also, they can’t risk relying on the policies of nations with strained relations.
Novak’s remarks sparked a discussion that may serve as a prelude to future events. Oil prices worldwide went up by more than $1 because people thought the crude supply would go down because of the cuts.
A barrel of Brent crude oil rose by 73 cents, or 0.9%, to $81.71. Meanwhile, a US West Texas Intermediate oil barrel climbed 91 cents, or 1.2 percent, to $78.40.
They had peaks of $82.17 and $78.77 earlier in the session. Brent was also expected to rise 3.3 percent and WTI 5.5 percent for a second consecutive week.
A senior market analyst at the New York-based foreign exchange firm OANDA said that crude prices are up because traders are waiting to see how Moscow reacts to the price ceiling on Russian oil.
In addition, Russian President Vladimir Putin stated that a decree outlining Moscow’s reaction to the price ceiling will be issued by the end of December.
According to Novak, Russian oil exports comprise 22% of the worldwide market. He also mentioned that Russia exported 20% of the world’s gas, demonstrating the world’s reliance on Russian energy.
He also said there have been European efforts to reduce dependence on Russian oil and gas. However, Russia’s energy exports remain in high demand worldwide, and Moscow has been working to broaden its customer base.
Russian Foreign Minister Sergey Novak has lauded the efforts of the OPEC+ group of major oil producers worldwide. And his prediction for oil prices in 2023 will stay between $70 and $100 per barrel.
In addition, it will prevent any surprises from occurring.
Natural gas pipelines from Russia supply around 40% of Europe’s needs. And an approximately 155 billion cubic meters were delivered last year. Most of the gas travels via Ukraine to eastern European countries, including Austria, Italy, and Slovakia.
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