Russia “Voluntarily” Cuts Oil Output in Response to Sanctions
Russia announced it will voluntarily cut oil output by 500,000 barrels per day in response to western sanctions, though there are doubts about whether the cuts were volunteered or volun-forced.
Background: Western nations imposed embargoes, sanctions, and a $60-per-barrel price cap on Russian oil trade in response to the ongoing war in Ukraine. As a result, Russia’s monthly oil and gas revenues fell 46 percent in January to the lowest levels since August 2020.
- Industry participants are in a “wait-and-see” approach to understand the full impact of the sanctions and whether output cuts will be permanent.
Observers believe there would be some production output losses from Russia anyhow, and the announced cut is just saving face for the Kremlin.
A price cap for thee, not for me
Russia has continued to sell below the price cap to trading partners including China and India, which has been “extremely lucrative” for those partners.
- Additionally, some analysts suggest that actual prices paid are well above the price cap.
Despite concerted western efforts, Russia did the most oil drilling in a decade in 2022 – raising questions about overall effectiveness.
Zoom out: Western nations have done everything possible to cut off Russian oil revenues. But much like the residents of Isla Nublar, oil, uh, finds a way.