Russian oil companies have been instructed to sharply reduce supplies to remove oversupply from the market and raise prices for Urals, which have fallen to their lowest levels since the pandemic.
Source. Reuters writes about this with reference to three industry sources.
Details. In March, oil shipments from Russia's western ports – in the Baltic and Black Seas – will be reduced by 25%. The plan for exports from Primorsk, Ust-Luga and Novorossiysk is only 2.24 million barrels per day, down from almost 2.9 million in February.
"A big decline in marine exports is coming in March," one Reuters source said: the drop could be even bigger than the government's announced production cut of 500,000 barrels per day.
According to another Reuters source, the option of a sharp reduction in Urals sea exports in March is being considered, but no final decision has been made. The goal is to "raise the price of Russian oil," the source explains: in January, the price of Urals fell below $40 per barrel due to discounts given to a few buyers from China, India and Turkey.
In February, Urals quotes rose to $50, but remain almost $30 below North Sea Brent.
According to another agency source, the Russian authorities do not want to reduce the utilization of refineries that are under the European embargo on oil products.
"This means that a reduction in production will lead to a drop in crude oil exports," the source said.
On December 5, 2022, the Group of Seven (G7) countries, the European Union, and Australia imposed a price ceiling on Russian oil, banning the transportation and insurance of tankers for oil over $60 per barrel. Since February 5, similar sanctions have been in place for petroleum products.
Background. A tanker with Russian oil was reportedly arrested in Europe because of sanctions.