Russia’s decision to cut oil production by 500,000 barrels a day reflects its inability to sell all the crude produced, US Treasury Assistant Secretary Ben Harris said Thursday.
Russian Deputy Prime Minister Alexander Novak said last week that Moscow would voluntarily cut production from next month after the February 5 imposition of a Western price cap on Russian oil and petroleum products. The reduction in production of around 5% temporarily caused world prices to rise.
“They cut production because they just couldn’t sell [нефть]not because they wanted to use oil and oil products as a weapon,” Harris said in his speech at the US Oil Summit. Argus Americas, is currently taking place in Houston, Texas.
Ben Harris Assistant Secretary of the Treasury
The cuts followed embargoes and sanctions, including an unprecedented $60-a-barrel oil price cap imposed by Western countries to punish Moscow for invading Ukraine. Poland, Latvia, Lithuania and Estonia are pushing to lower the price cap for Russian crude oil.
Russia’s monthly oil and gas budget revenue fell 46% in January to its lowest level since August 2020, the finance ministry said, due to the impact of Western sanctions on the biggest export. profitable from Russia.
The restriction was intended to maintain market stability and reduce Moscow’s revenue, and both goals were achieved, Harris said.
According to him, not a single American company participated in the trade of Russian oil at a price above the established limit.
At the moment, it is unclear whether Russia will continue to cut oil production, Michael Cohen, chief US economist at the British Petroleum Corporation, told the conference.
Colin Parfitt, Chevron’s vice president of refining, also said it was not yet clear whether the production cuts were significant. The market is waiting, Parfitt told Reuters on the sidelines of the conference.
Russia is still selling oil at a discount to buyers such as China and India. Buying Russian oil at a discount is “extremely profitable” for much of the world, Mercuria chairman Daniel Jaggi told the conference.
However, Goldman Sachs reported earlier this week that Moscow’s trading partners are increasingly paying more for Russian oil than prices suggest, shielding Russia from the impact of Western sanctions.
