Russia is ready to cut its oil output by 7% early next year to hit back at the EU-led price cap

• Russia could slash its oil output by up to 700,000 barrels a day, its deputy prime minister said.
• The US and its allies capped Russian crude prices at $60 a barrel earlier this month.
• "We are ready to partially cut our production early next year," Alexander Novak told state TV Friday.

Russia could reduce its daily oil output by as much as 7% early in the new year, in response to the US and its allies capping its crude prices, the country's deputy prime minister said Friday.

Alexander Novak said it was unacceptable for Russia to be dependent on decisions made by unfriendly countries, state-run news agency Tass reported.

"We are ready to go for a partial reduction in production," Novak said in an interview with the state-run Rossiya-24 TV channel, per Tass.

"I assess the risks, when we are at the beginning of next year, we may have a reduction of somewhere between 500,000 to 700,000 barrels per day. This is about 5-7% for us," he said.

Novak, who negotiates with the OPEC group of major oil producers on Russia's behalf, described the cuts as "insignificant", but still a potential squeeze on global crude supplies.

"We'll try to find some common ground with our counterparts to prevent such risks," the government official said, according to a Bloomberg report.

"But right now, we'd rather take a risk of a production cut than stick to the policy of selling in line with the threshold."

The European Union and the G7 group of countries - the US, Canada, France, Germany, Italy, Japan and the UK - capped the price of Russian oil at $60 a barrel earlier this month.

Refiners, traders, and financers won't be allowed to handle Russian oil unless it was priced below that level, while tankers will be denied insurance unless they trade Russian crude at or under $60 a barrel.

The EU has also banned seaborne imports of Russian crude in a bid to reduce the Kremlin's energy revenues and its funding of its ongoing war on Ukraine.

Russia's oil exports tumbled 54% in the first full week since the US ban came into effect in early December, data from Bloomberg showed.

Russia has said it will retaliate against those measures by refusing to do business with any country that agrees to cap oil prices at the $60 a barrel level.

Novak said the decree promised by President Vladimir Putin on Thursday to respond to western sanctions will bring in those measures and is close to being completed.

"As for the price ceiling, a presidential decree is being prepared now. It has already been practically agreed upon and is being finalized," he said, per Tass.

"As part of this decree, there will be a ban on the supply of oil and oil products to those countries and those legal entities that will demand in contracts that the price ceiling introduced by the European Union," he added.

Oil benchmarks edged higher on the news that Russia could slash supply, with Brent crude climbing 1.38% to $82.80 a barrel and West Texas Intermediate crude up 1.60% to $78.73 a barrel.

China's struggle to reopen its economy after two years of harsh zero-COVID lockdowns has weighed on crude prices in recent months, with both benchmarks slipping around 12% since the start of November.

Read more: Russian oil exports crater by 54% in the first full week of the EU's embargo amid a shortage of tankers willing to carry cargoes