The European Union downplayed the impact of Russia’s cut in oil production and said it was forced on Moscow by sanctions related to its invasion of Ukraine.
“It wasn’t voluntary,” EU Energy Commissioner Kadri Simson said in an interview in Cairo. “It was forced on them. They don’t have the ability to keep up the production volumes because they don’t have access to necessary technology.”
The sanctions have restricted Russia’s ability to find buyers for all the 10.9 MMbpd it was pumping as of late 2022, Simson said, adding that the giant producer is struggling even after accepting big discounts.
Brent crude jumped after Deputy Prime Minister Alexander Novak said Russia would lower production by 500,000 bpd next month. That extended the benchmark’s weekly rise to 8.1%, the most in about four months. Still, it retraced some of its gains on Feb. 13, dropping to about $86 a bbl as the dollar strengthened.
Simson said Russia’s move — which follows an EU ban on imports of almost all of Moscow’s crude and refined fuels and a G7 price cap — was unlikely to push oil higher in the long run.
Russia’s crude production and exports have proved resilient to several waves of Western sanctions, according to industry data seen and analyzed by Bloomberg. While the nation had to reduce output in the weeks after the invasion last February to just over 10 MMbpd, by the end of the year it rebounded.
The EU’s energy commission will publish an assessment at the end of this month looking at the bloc’s ability to restock on natural gas ahead of next winter. It managed to refill its storage rapidly before this winter even as Russia lowered piped gas flows in retaliation against the sanctions. That was in part due to the ramp up of purchases of liquefied natural gas from the U.S. and other nations.
While Russia still sends Europe some piped gas, those volumes could drop further, Simson said.
“Our crisis strategy, of course, is built on the assumption that they will cut those deliveries completely,” Simson said.
