Deputy Prime Minister Alexander Novak on June 3 announced that Russia will cut oil exports by 500,000 barrels per day in August. He said,. “Within the efforts to ensure the oil market remains balanced, Russia will voluntarily reduce its oil supply in the month of August by 500 thousand barrels per day by cutting its exports by that quantity to global markets.”
On Monday, oil rose as top exporter Saudi Arabia extended its supply cut through August, overshadowing concerns about a global economic slowdown and possible further interest rate hikes from the US Federal Reserve.
The SPA quoted an official source from the Ministry of Energy saying, “The kingdom’s production for the month of August 2023 will be approximately nine million barrels per day,” The cuts will take the kingdom’s production to the lowest level in several years, sacrificing sales volumes for what has so far been little reward in terms of higher prices.
Soon after the Saudi announcement, Novak said that Moscow will also cut oil output from August. The cuts amount to 1.5 per cent of global supply and bring the total pledged by OPEC to 5.16 million bpd.
The announcement by Russian deputy Prime Minister Novak who is responsible for energy policy, came on the back of cuts to Russian oil production this year by the same volume as part of Moscow’s response to Western sanctions levied over the conflict in Ukraine. Since the beginning of large-scale hostilities in Ukraine last February, Moscow has pivoted energy exports from Europe to India and China.
Russia’s exports have stayed strong despite Western sanctions. It had already pledged to reduce its output by 500,000 barrels bpd to 9.5 million bpd from March until year-end. Russia is the world’s second largest oil exporter after Saudi Arabia, whose crown prince, Mohammed bin Salman, spoke to Putin on June 27.
Analysts say that Saudi Arabia needs oil to be priced at $80 per barrel to balance its budget, which is well above recent averages. Brent has been down 11 percent since the beginning of the year and WTI is down 7 percent, as a sluggish recovery in China and worries about the US economy weigh on demand forecasts.