A view shows the Russian oil producer Gazprom Neft's Moscow oil refinery on the south-eastern outskirts of Moscow on April 28, 2022. (PHOTO / AFP)

MOSCOW - Russia will cut oil production by 500,000 barrels per day, or around 5 percent of output , in March, Deputy Prime Minister Alexander Novak said on Friday, after the West imposed price caps on Russian oil and oil products.

The price of Brent crude rose on the news of the output cut from Russia, the world's second-largest oil exporter after Saudi Arabia, increasing by more than 2.5 percent on the day to $86.6 per barrel.

"As of today, we are fully selling the entire volume of oil produced, however, as stated earlier, we will not sell oil to those who directly or indirectly adhere to the principles of the 'price cap'," Novak said in a statement.

"In this regard, Russia will voluntarily reduce production by 500,000 barrels per day in March. This will contribute to the restoration of market relations."

The G7, the European Union and Australia agreed to ban the use of Western-supplied maritime insurance, finance and brokering for seaborne Russian oil priced above $60 per barrel from Dec 5 as part of Western sanctions on Moscow over the conflict in Ukraine

ALSO READ: EU struggles to agree Russian oil product price cap

The Kremlin said on Friday that Russia had held talks with some members of the OPEC+ producers group regarding its decision to cut output.

The G7, the European Union and Australia agreed to ban the use of Western-supplied maritime insurance, finance and brokering for seaborne Russian oil priced above $60 per barrel from Dec 5 as part of Western sanctions on Moscow over the conflict in Ukraine.

The EU also imposed a ban on purchases of Russian oil products and set price caps from Feb 5. In turn, Russia has banned deals involving any application of the price cap mechanisms.

Output cut

The last big fall in Russian oil output was in April when it collapsed by nearly 9 percent following the introduction of Western sanctions over Ukraine. Since then, Russia has managed to set up logistic chains for its oil sales, mostly in Asia.

Russia's decision to cut oil production was announced only nine days after an OPEC+ panel, in which Russia is a member, endorsed the oil producer group's current output policy, leaving production cuts agreed last year in place.

"Russia believes that the 'price cap' mechanism in the sale of Russian oil and oil products is an interference in market relations and a continuation of the destructive energy policy of the countries of the collective West," Novak said.

His spokesperson said later that the cuts will relate to crude oil only, without gas condensate, a type of light oil.

READ MORE: Official: Russia could cut oil output given Western price cap

Russia's oil output last year defied numerous predictions of a decline, rising by 2 percent to 535 million tonnes (10.7 million barrels per day) thanks to a jump in sales to Asia.

However, following a raft of new sanctions from the West, Russia is facing more challenges in selling oil, a key source of revenue for the state budget, which posted a $25 billion deficit in January.