The impact, this time, is in the energy sector, as Russia announced, on Friday, its intention to reduce its oil production by 500,000 barrels per day, starting next March.
This reduction represents about 5 percent of Russia’s black gold production.
This announcement led to a jump in oil prices in the last trading sessions, as Brent crude futures rose, on Friday, at settlement by $1.89, or 2.2 percent, to $86.39 a barrel.
US West Texas Intermediate crude futures rose $1.66, or 2.1%, to $79.72.
Russian Deputy Prime Minister Alexander Novak said that Moscow had not held any formal consultations with other parties regarding its decision to cut oil production by 500,000 barrels per day in March.
The Russian decision came as a response to the European Union imposing a maximum price limit on Russian oil products, in addition to an import ban that came into force on February 5.
The European decision was welcomed by the United States immediately after its announcement, as US Treasury Secretary Janet Yellen said on February 4 that the new maximum price limits for Russian oil products from the West will further limit Russian oil revenues while preserving the supply of global energy markets.
Yellen said in a statement after the deal was announced that the ceilings reached will play a crucial role in the work of our “global coalition” to undermine Russia’s ability to continue its “illegal war in Ukraine”.
“In addition to our historic sanctions, we are forcing Russian President Vladimir Putin to choose between financing his brutal war or propping up his ailing economy,” she added.
The alliance comprising the Group of Seven, the European Union and Australia imposed a ceiling on Russian oil prices at $100 a barrel for products traded at a premium to crude oil, particularly diesel, and $45 a barrel for products traded at a discount, such as fuel oil and naphtha.
the expected impact of the decision
International oil expert, Dr. Mamdouh Salameh, said in statements to “Sky News Arabia Economy” that the Russian decision to cut production starting from the beginning of next March was expected, especially after Russian President Vladimir Putin announced weeks ago that his country would not export any barrels of Russian oil to Russia. Countries that adhere to the Western price ceiling.
Salameh added that expectations about the decision to cut production, which Moscow hinted at earlier, ranged between 500,000 and 700,000 barrels, but the decision came with 500,000 barrels.
The decision has different effects, according to the international oil expert, who confirmed that the direct impact will reach the global oil market because it will increase the shortage in oil supplies in the world, and will also lead to higher prices.
Salama expects Brent crude to reach $90 during the first half of this year, and may touch $100 a barrel throughout the year.
“These prices will continue for a long time, especially in light of the lack of global investment to expand production capacity in the oil and gas sectors, which are the main pillars of the world economy,” Salameh said.
Regarding the West’s influence on the decision, Salameh said: “Of course, Western countries that imposed a price ceiling will now be forced to buy their oil needs at a much higher price, which increases the financial burden on them and their economies.”
The global expert stressed that there are no alternatives to Russian oil exports, as countries such as Kazakhstan and Azerbaijan are unable to raise production at the present time.
And the US shale oil production has reached its limit, he said, and the US cannot raise production more than it is currently.
According to Salama, the levels of oil production in America are currently at 9.5 over 10 million barrels per day, contrary to what the US Information Agency claims that US production exceeds 12 million barrels.
Salama believes that there is no benefit to the embargoes or price limits imposed by the West on Russian oil and its products.
Two delegates to the Organization of Petroleum Exporting Countries and its allies, “OPEC +”, told Reuters, on Friday, that the group does not intend to take any action after Russia announced a reduction in oil production.
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