The G7 price cap coalition against Russia has announced authoritatively that the mechanism is still meeting the objectives over which it was put together.
An unnamed official of the Coalition told Reuters last weekend that any Russian production cuts that may be forthcoming will disproportionately hurt developing countries.
Russia had jolted the global oil circuit with the announcement earlier in the day of a 500,000 bpd crude oil production cut – crude oil production, not crude oil and condensate production.
The announcement was preceded with a warning from Russia’s Deputy Prime Minister, Alexander Novak, that, there was a risk of reduced crude oil production yet this year directly as a result of the EU import bans and the G7 price caps on its crude oil and crude oil products.
The G7 official cautioned, however, against the veracity of Russia’s reports of oil production cuts.
Up until this week, it had been widely reported that Russia’s crude oil production and exports were holding fast in the fact of the bans and price caps, with the Russian Ministry reporting 9.8-9.9 million bpd last month – a close match to November and December figures despite the new measures designed to punish Russia for its military operations in Ukraine.
The discount for Russian Urals crude oil has dropped to $30 per barrel below the international Brent crude oil benchmark, with Russia’s budget sinking into a deficit in January. An oil production cut on behalf of Russia could boost the Brent benchmark, inadvertently boosting Urals pricing too.
Russia said that it had held discussions with some OPEC+ members regarding its decision to cut oil production, but two OPEC+ delegates told Reuters that OPEC+ had no plans to cut production.
So far, Russia has been able to find willing buyers in the Asian market for its crude oil, largely in defiance of Western sanctions.
By Kene Okafor