In apparent retaliation for Western sanctions, Russia is planning to slash crude exports from western ports by one-quarter in March and April, expanding the 500,000 barrel-per-day cuts it earlier announced for next.
Citing three sources in the Russian oil market, Reuters says that the plan to cut exports by up to one-quarter from Western ports goes beyond the 500,000 bpd production cut planned for March.
However, there is no confirmation of the reported 25% cut in exports from Western ports from Russian authorities, and according to the news agency, Russia’s pipeline giant, Transneft, has not responded to for comment as of press time.
Western sanctions are forcing Moscow to perform various oil market acrobatics, from output cuts and the creation of new pricing mechanisms for its flagship Urals crude to selling its crude to China and India at massive discounts.
When Russia announced the 500,000 bpd production cut for March, markets were largely unshaken, despite the drop in Russian seaborne crude exports already in place at the time
At 12:15 p.m. EST on Wednesday, Brent crude was trading at $81.02, down 2.44% on the day, while WTI was trading at $74.35, down 2.63% on the day.
Russia’s original plans to cut production by 500,000 bpd in March would amount to 5% of Russia’s output or 0.5% of global production, according to Reuters
Cutting from Western ports reflects the diversion of Russian crude to eastern markets, primarily Indian and China, but also Turkey. The rerouting, however, has hit snags with refined products, which have been under Western sanctions since February 5th.
According to U.S. Treasury officials, the decision to cut output in March does not reflect retaliation, as much as it reflects Moscow’s inability to sell its normal amount of oil.
By Bosco Agba