Russia has begun to cut its oil production by 500,000 barrels per day due to its inability to sell all the raw materials it produces. So said Deputy Treasury Secretary Ben Harris. He expressed doubts that Moscow was trying to use the measure as a weapon to destabilize the oil market.
Recall that Russia announced such a significant reduction in oil production (by about 5%), starting in March. This happened after the West introduced restrictions on Russian oil prices and the embargo on petroleum products.
By imposing sanctions on Russia’s energy sector, Harris said, the United States originally intended to achieve stability in the global oil market while limiting the financial capabilities of the Kremlin: both goals were achieved.
“The embargo on petroleum products has forced Russian oil companies to reduce production”
Russian oil and gas analyst Mikhail Krutikhin, in an interview with the Russian media service, said he agreed with the main conclusions of the US Treasury representative. According to him, Russia still somehow manages to maintain a relatively acceptable level of crude oil exports through very long-distance transportation to India, China and other countries. But not more.
“The embargo on petroleum products has simply forced Russian oil companies to cut production,” he said. “Domestic refineries are not able to process so many raw materials.”
At the same time, the analyst notes that the reduction in Russian oil production did not shock the markets: “For three consecutive days, as I can see on the charts, the prices of Brent oil and ‘Urals are falling. That is, the world has understood that the reduction in Russian production is not voluntary, but forced, since it is simply impossible to sell it in the same volumes. And since there has been no shortage of oil, there are no serious reasons to raise oil prices.
The embargo on petroleum products has significantly affected the plans of Russian oil companies, stressed Mikhail Krutikhin: “Their strategy now is to send as much oil as possible for export under almost all conditions, with serious discounts. At the same time, according to official data, federal budget revenue from the sale of oil and gas fell by almost half in January, although crude oil exports did not decline much. This indicates that the price of Russian oil is well below the ceiling set by the West.
At the same time, the expert noted that a sharp drop in income is typical for the beginning of the year.
“I think the Russian budget deficit will continue, but there are some nuances. For example, oil companies have not yet paid what is called additional income tax. This will slightly increase the yield of the federal budget. In addition, oil companies will be forced to share profits and pay out “voluntary war donations” in the amount of 250 billion rubles. But that won’t solve the problem,” he says.
Sanctions work, and they work exactly as their initiators intended, – the analyst believes. There is no crisis in the oil supply markets, no severe oil shortages, and Russia has lost a huge chunk of its income.
“None of the major players, except Russia, are interested in rapidly rising oil prices”
After the introduction of sanctions against Russian petroleum products, there was especially nowhere left to put them, admits economic observer, publicist Maxim Blunt. According to him, it will not be possible to transport oil in such volumes to the East due to the limited capacity of the rail network.
“A traffic jam has now formed there and there is a little war between the Russian coal miners and the tankers over which wagons and tanks will go first to China,” added the media interlocutor. . “This problem will not be solved quickly. Moreover, there seemed to be a timid hope that by reducing production it would be possible to influence world prices, which did not suit Moscow at all.
Maxim Blunt doubts that Russia will continue to cut oil production: “There is also the question of how OPEC+ countries and other oil producing countries will react to this. Because a holy place is never empty. Even if Russia leaves the market completely, the world will survive it. We were convinced of this by the example of the European gas market, from which Russia has almost completely separated. Very quickly it was hunters who filled this niche.
Before announcing the production cut, Putin called a number of leaders of the OPEC+ countries, including the Saudi Crown Prince, and seemed to have reached some sort of compromise, recalls Maxim Blunt: “There are information promised to him by OPEC not to compensate for the drop in oil production. But it is difficult to imagine that, for example, Norway would give guarantees in this respect. However, none of the major players, except Russia, are interested in rapidly rising oil prices, including Arab countries. For them, stability is more important than the leap forward that took place last year and led to the threat of a global recession. A recession – among other things – means a drop in demand for oil.
Oil prices have stabilized and are even starting to fall, pointed out Maxim Blunt. This suits major oil buyers, so that the West can be satisfied with the results of its actions, he concluded.
