Russia may be using oil as weapon in economic war: production to be cut by some 500,000 bpd

Russian Oil Rig

Link Securities | The Wall Street Journal (WSJ) reported on Friday that Russia’s government had that day announced that it plans to cut its oil production by about 500,000 barrels per day, or about 5 percent, starting next month, in a move it said was in response to Western sanctions.

The newspaper notes that Friday’s move is the first in which Russia telegraphed a specific response to oil markets to the Western measures, implying to some that it may now be using oil as a weapon in the ongoing economic war between Russia and the West. However, some analysts said the move reflected Russia’s challenges in selling its oil amid Western sanctions.

On Friday, Russian Deputy Prime Minister Alexander Novak said they were fully selling the entire volume of oil produced, but were not selling oil to those who directly or indirectly adhere to the “maximum price” principles. Novak said Russia would voluntarily cut production by 500,000 barrels a day in March and that this would help restore market relations.

OPEC said on Friday that it will not take any decision after Russia’s announcement.

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