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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Rosneft Throws OPEC For A Loop, Boosts Output By 70,000 Bpd

Rosneft oil storage

Rosneft increased its crude oil production by 70,000 bpd over the last two days, the company told investors, in preparation for an OPEC+ decision to start easing production quotas, Bloomberg reports, citing Russian asset manager Renaissance Capital.

The company has a spare production capacity of between 120,000 and 150,000 bpd, and its average daily production during the first quarter was 4.57 million bpd.

According to Rosneft’s press service, the company is still producing with the quota assigned it under the OPEC+ deal but the fast ramp-up is a clear indication Russia’s largest oil producer is eager to return to higher daily rates, especially after the sevenfold increase in attributable net profit in the first quarter thanks to improving prices. At the release of the Q1 figures, Rosneft said it could quickly bring back production of 100,000 bpd.

Last week oil prices started sliding down after reports quoting Saudi Arabia’s and Russia’s energy ministers as saying the two are considering relaxing the production quotas in light of the continuing decline in Venezuela’s oil production and the re-imposition of U.S. sanctions against Iran.

In an interview with Bloomberg, Alexander Novak said no decision has been made yet about relaxing the quotas. The decision, he said, will be made no earlier than June 22. The UAE’s Oil Minister, Suhail al-Mazrouei, said that this decision would have to be unanimous as well. Related: Goldman: The Oil Price Rally Isn’t Over Yet

It seems, however, that most traders are already pricing in an increase in production from OPEC and Russia. Saudi Arabia’s daily average is also rising, hitting the highest in seven months last week, according to tanker tracking data cited by Bloomberg.

Citigroup commodity analysts earlier this month estimated that Russia has 408,000 bpd in idled capacity, which constitutes 4 percent of its total, which stands at 11.3 million bpd. That’s a lot less than Saudi Arabia’s idle capacity, which stands at 2.12 million bpd, but is apparently still a significant enough portion of the total.

By Irina Slav for Oilprice.com

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  • Daniel Pearson on June 01 2018 said:
    If Rosneft is producing 4.57 million bpd, and they increase production by 70,000 bpd, it will not lift its oil production above 5 million bpd. The boost of 70,000 bpd will lift production to a total of 4.64 million bpd. Regards
  • John Brown on June 01 2018 said:
    It looks like the Russian are smart enough to realize that $80 plus per barrel oil will slow the worlds economy, hammer demand, and set oil production in the USA and elsewhere on fire in a good way, along with opening up a huge window for renewables to grab market share that will never come back to carbon based energy. Given oil supplies and the massive amount of capacity sitting idle to absorb the oil glut and drive up prices there is really no reason, except artificial manipulation, for oil to be over $40 to $50. However, $60 to $70 is probably as sweet spot for everybody. It will allow supply to grow in the USA and elsewhere, and renewables to grow, but it won't hurt demand from economic growth that should sustain oil prices in that range longer. $80 plus oil would have been very short term leading to a huge crash, probably permanently. This is a smart move. It will be interesting to see what all the short term vested interests do that want to grab as much as they can while they can without concern for medium and long term consequences!

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