Russia previously announced that it would voluntarily cut its oil production from March by up to 500,000 barrels per day, equivalent to 5% of its output or 0.5% of global production.
The market quickly digested the news of Russia's production cut after this announcement as the magnitude was small.
However, according to three Russian sources who spoke to the media, the cut in oil exports from Russia's western ports in March could reach 25%, equivalent to 625,000 barrels per day, which would be a bigger hit than the previously announced production cut.
The sources noted that Russia plans to cut oil exports from its western ports by up to 25% in March compared to February in order to boost oil prices.
A first source said that Transneft, Russia's national oil pipeline carrier, had informed at least two oil companies to reduce their exports from western ports in March by 20-25%.
This was backed up by another source, who said that oil exports from several western Russian ports, such as Primorsk, Ust-Luga and Novorossiisk, would be cut by up to a quarter of what they were in February, but that some adjustments were still possible.
Russia usually exports up to 10 million tonnes of oil per month from the ports of Primorsk, Ust-Luga and Novorossiisk, which translates into the equivalent of 2.5 million barrels per day of Urals crude.
In addition, the source added that there are no plans to reduce exports from the Pacific region. This means that Russia's export cuts in March were mainly aimed at oil going to Europe, but sales in Asia were not affected.
So far, neither the Russian Energy Ministry nor Transneft has responded to the news.
Commenting on Russia's reduction in oil production, US Treasury officials said the decision reflected its dilemma of not being able to sell all its oil.
Since the West imposed embargoes and price cap sanctions on Russian oil, Russia has been trying to redirect its crude and oil products to Asia. While Asian buyers are happy to buy cheap oil from the Urals, the extension of shipping routes has been a key factor in limiting Russian oil exports.
Russian oil prices have remained in the lower range due to a reduction in shipping vessels and soaring shipping freight rates, and are also below the price ceiling of US$60 per barrel set by Europe and the US.
According to Russian sources, the reduction in exports is an attempt to raise the price of Russian seaborne crude. However, others interpreted it as an act of retaliation by Russia against the next round of sanctions from Europe and the US.
Post time: Mar-10-2023