Russia’s oil production hasn’t changed so far this month as demand and prices came down crashing, and the questions remains whether Moscow will live up to its OPEC+ output cut pledge
Production of crude oil and condensate in Russia has been unchanged so far this month compared to March, while Moscow has promised to reduce production by around 2 million bpd in May and June as part of the new OPEC+ deal.
According to data from the Russian energy ministry, seen by Bloomberg, Russia’s crude and condensate production averaged 11.289 million bpd between April 1 and 23—a week before Russia is set to reduce its production under the new agreement.
In March, Russia produced 11.29 million bpd of crude oil and condensate.
This figure for April would suggest that Russia, which needs some time to reduce production at complex fields in cold weather and complex geology, may not be able to reach its target for production reduction for May.
That target is reducing output by 1.8 million bpd-2.5 million bpd (depending on who you ask) from a baseline level of 11 million bpd—the same baseline given to Saudi Arabia in the latest OPEC+ deal. All other producers in the pact will have to cut from their October 2018 levels. According to Russian news agency Interfax, Russia’s share of the OPEC+ cuts would be a cut of 1.8 million bpd in May and June compared to April. According to Bloomberg, the share is 2.5 million bpd from the baseline level.
On the face of it, Russia agreed to much deeper cuts in the latest deal than those it rejected in early March when Moscow’s refusal to back a collective 1.5 million bpd OPEC+ cut led to the one-month spat and the oil price war between Saudi Arabia and Russia. In reality, cheating with quotas has been an art in Russia since the start of the OPEC+ alliance more than three years ago.
In the new deal, which lacks clear mechanisms for compliance observance, Russia’s target for oil production is 8.5 million bpd in May and June, Vitaly Yermakov and James Henderson of the Oxford Institute for Energy Studies wrote in a paper earlier this month. However, it’s not clear if condensate is included, which changes Russia’s overall cut. Including condensate, Russia’s share of the cuts should be 2.8 million bpd, without condensate, the cut would be around 2 million bpd, according to the authors.
“[I]t will be important to monitor compliance, especially as there is only a three-week period before around 20% of Russian oil production needs to be temporarily shut down. We suspect that this may be a task that is very difficult to achieve but would not underestimate the ingenuity of the Russian oil industry and the Kremlin to at least make a case for compliance by May,” they said.
By Tsvetana Paraskova for Oilprice.com
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