Russian 500,000 b/d crude production cut plan currently just covers March

Russian Deputy Prime Minister Alexander Novak said Feb. 21 the government's decision to cut crude production by 500,000 b/d currently only covers March but may be extended, the Tass news agency reported.

"We will watch how the situation on the market develops, and based on this, market decisions will be taken. For now, the decision is only for March," he said.

Novak added that the production cut, announced Feb. 10, will be spread proportionally across Russian producers.

Russia is cutting output after an EU ban on most seaborne imports of Russian crude and a $60/b price cap came into force Dec. 5. From Feb. 5 this was followed by a similar ban on oil product imports and price caps of $100/b for imports of Russian products that typically trade at a premium to crude, such as diesel, gasoline and kerosene, and $45/b on products like fuel oil that generally trade at a discount to crude.

To date, the restrictions have not had a major impact on Russian crude oil production volumes. Russian output fell 10,000 b/d on the month to 9.85 million b/d in January, according to the latest Platts survey by S&P Global Commodity Insights. That compares with 10.11 million b/d in February 2022.

Analysts expect the sanctions to have a significant impact on Russian production from March.

S&P Global Commodity Insights expects a drop in Russian oil production of 500,000 b/d from December to March. This is due to expected run cuts, as a result of problems re-routing clean products into atypical markets on an insufficient supply of ships.

"A greater disruption is admittedly possible, but unless the US and EU tighten sanctions, we do not anticipate Russia voluntarily cutting more production than dictated by market forces. Revenue requirements from war spending and non-energy sanctions will likely prevent Russia from holding back supply from its diminishing list of willing importers," S&P Global said.

It forecasts a recovery in output of 250,000 b/d by October if more prohibitive price caps and new Western sanctions are not introduced.