Russia could reduce its oil production in response to the G-7 cap on the price of crude, President Vladimir Putin said.
Putin told reporters in comments on state Rossiya 24 TV that a decision on Moscow's response will be made within the next several days.
I'm not saying now that this is a decision, but if necessary we'll think about possible production cuts, Putin said. I have already said that we won't sell oil to countries that participate in a price cap.
After months of planning and negotiations, the biggest tranche of international sanctions on Russian oil took effect on Monday. The EU has banned almost all seaborne imports of the country's crude oil, and the G-7 agreed that anyone wanting to access key services that the bloc provides — especially insurance — will have to pay less than $60 a barrel.
There are still enormous unanswered questions that will affect the oil market, such as the depth of non-European insurance markets, the appetite of some tanker owners to participate in trade with Russia, and how effective enforcement of the cap can be.
Ben Harris, assistant secretary for economic policy at the US Treasury, said earlier this week that whatever Russia does, there are no good options. It hurts their partners, but it also hurts their pocketbooks. Russia has said that the effects of the price cap on oil production will be limited. Any volatility in the nation's output won't be higher than the fluctuations in the spring, first Deputy Energy Minister Pavel Sorokin said earlier this week.
In April, Russia pumped an average of 10.05 million barrels a day, down from 11.08 million barrels a day in February, according to industry data seen by Bloomberg. In November, output began to recover, reaching an eight-month high in November.
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The price cap won't have any negative effects on Russia's revenue as the $60 a barrel threshold introduced by western countries corresponds to the prices we sell today, Putin said. We already sell at about these prices, so don't worry about the budget. Russia s flagship Urals crude exported from the Baltic port of Primorsk was assessed at $41.59 a barrel on Thursday, according to data from Argus Media, whose figures the Russian government used to calculate export duties.
The price of Russia ESPO crude blend in Asia is well above the western cap, trading at $67.11 a barrel on Thursday, according to Argus data.
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