Russia plans deep March oil export cuts

Russia plans to cut oil exports from its western ports by up to 25% in March versus February, exceeding its announced production cuts in a bid to lift prices for its oil, three sources in the Russian oil market said.

Russia’s Energy ministry declined to comment. Russia’s pipeline monopoly Transneft did not immediately respond to a Reuters request for comment.

Russia had already announced plans to cut its oil production by 500,000 barrels per day in March, amounting to 5% of its output or 0.5% of global production.

Russian officials said the voluntary output cuts in March would last one month and would follow the start of Western price caps on Russian oil on Dec 5. and oil products on Feb. 5. The cut will be made from January output levels.

Russia has so far managed to reroute most of its oil exports from Europe to India, China and Turkey, which happily snapped up cheap barrels and ignored Western sanctions.

But Moscow has struggled to re-route exports of refined product away from Europe after Indian, Chinese and Turkish refiners flooded the market with fuels produced from Russian oil.

U.S. treasury officials have said the Russian decision to cut oil production reflects its inability to sell all its oil.

Washington has said it pushed for the introduction of price caps to limit revenues for President Vladimir Putin’s war in Ukraine but have set them high enough to avoid a further spike in global oil prices.

“The export cuts appear to be deeper than the planned production cuts. It might help bump up the price for Russian oil,” one of the sources said.

The G7 group of industrialised nations has agreed to put a price cap on Russian oil at $60 per barrel.

Russian oil has traded below than level in recent weeks due to steep discounts and expensive freight rates. Global Brent benchmark prices trade at above $80 per barrel.

Putin and other Russian officials have said they would refuse to sell oil to countries which abide by the caps and promised to take measures to reduce the discounts.

The first source said Transneft had informed at least two oil firms they would be allocated 20-25% fewer cargoes in March from Western ports than they had asked for.

The cuts from the ports of Primorsk and Ust-Luga on the Baltic Sea and Novorossiisk on the Black Sea will amount to a quarter of February volumes although some adjustments could still be made, another source said.

“There are no plans to cut exports from the Pacific,” the first source said.

Russia normally exports up to 10 million tonnes a month or 2.5 million bpd of Urals crude from Primorsk, Ust-Luga and Novorossiisk and a cut of 25% would represent as much as 625,000 bpd if confirmed by Transneft and agreed by oil companies.