Russia will lower oil manufacturing from subsequent month in response to the value cap imposed by western nations, the nation’s prime power official mentioned, within the first signal Moscow is shifting to weaponise oil provides after slashing pure fuel exports to Europe final 12 months.

The lower of 500,000 barrels a day, the equal of about 5 per cent of Russia’s manufacturing or 0.5 per cent of world provide, will assist “restore market relations”, Alexander Novak mentioned in a press release on Friday.

The announcement comes days after the most recent EU sanctions and different western measures in opposition to the Russian oil sector took impact in retaliation for Moscow’s full-scale invasion of Ukraine and simply two weeks earlier than the one-year anniversary of the beginning of the struggle.

The EU prolonged its ban on seaborne imports of Russian crude to cowl refined fuels reminiscent of diesel and petrol on February 5, whereas the G7 concurrently imposed a value cap on the identical fuels consumers should abide by if they’re to entry western tanker and insurance coverage markets.

Novak, who’s deputy prime minister and leads Russia’s negotiations with the Opec+ group of oil producers, has lengthy warned that Moscow may retaliate in opposition to western measures designed to hit its oil revenues.

“Russia believes the value cap mechanism for promoting Russian oil and oil merchandise interferes with market relations,” Novak mentioned. “It continues the damaging power coverage of the nations of the collective west.”

Brent crude, the worldwide benchmark, jumped 2.3 per cent to $86.43 a barrel instantly after the announcement on Friday, having earlier traded largely flat on the day.

Oil costs surged to $139 a barrel — the very best stage since 2008 — shortly after Russia’s full-scale invasion of Ukraine final 12 months, however have fallen again in latest months because the affect of western sanctions on the quantity of Russian oil reaching the market was extra restricted than anticipated.

The G7 value cap is partly designed to maintain Russian oil available in the market to keep away from the financial harm of disrupting exports from one of many world’s largest oil exporters, however at a lower cost.

However the cuts introduced by Moscow will increase issues that Russia is shifting to weaponise oil provides after slashing pure fuel exports to Europe final 12 months in response to western backing for Ukraine, triggering an power disaster and file gasoline costs throughout the continent.

Till Friday Russia had broadly tried to keep up oil exports, which give extra authorities revenues than fuel. However analysts warned that it might be struggling to promote all its oil because the west steps up its sanctions.

European pure fuel costs have additionally fallen sharply in latest months, main some figures within the power business to argue that Russian president Vladimir Putin has “misplaced the power struggle”.

Russia has warned that it may reply to the oil value cap and has mentioned it is not going to take care of consumers who formally use it. Its predominant export crude Urals, nevertheless, has fallen to a big low cost beneath $60 a barrel because it tries to seek out new consumers in Asia, which means it already costs beneath the cap.

“It’s been threatened for a very long time in response to the western measures like the value cap,” mentioned Amrita Sen at Vitality Facets.

“Given Russia’s crude has fallen to steep reductions in worldwide markets it is smart from Moscow’s standpoint to attempt to maximise revenues by slicing manufacturing to tighten the market and enhance the value.”

Christyan Malek, world head of power technique at JPMorgan, mentioned the transfer would “be seen in some quarters as Russia beginning to weaponise oil”.

“However there may be arguably additionally a extra sensible market-driven cause. There’s a whole lot of ‘darkish stock’ on the market stemming partly from Russia rerouting its exports away from Europe to Asia so that they wish to be certain the market shouldn’t be too oversupplied.”

Opec, which has partnered with Russia since 2016 to handle oil manufacturing, had no instant response to Moscow’s announcement.

One Gulf Opec supply mentioned the group, which angered Washington when it introduced it was decreasing provide final October to attempt to help the market, was unlikely to reply.

Putin’s spokesman, Dmitry Peskov, advised reporters Russia had mentioned its choice to chop manufacturing with “a number of” Opec+ members earlier than saying the transfer.

Three folks with information of discussions mentioned Saudi Arabia, Opec’s strongest member, had been knowledgeable prematurely.

There was no instant response to queries from the Saudi Arabian power ministry.

Novak mentioned Russia had no drawback promoting its oil however business analysts have been predicting exports would finally fall as sanctions tighten, doubtlessly mitigating a part of the market response.

“We anticipated greater however involuntary cuts ensuing from logistical obstacles,” mentioned Ron Smith, oil and fuel analyst at Russian financial institution BCS International Markets.

Further reporting by Samer Al-Atrush in Riyadh, Tom Wilson in London and Max Seddon in Riga