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No, The Oil Glut Hasn’t Disappeared

Weaker than expected oil demand…

Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Why Russia Fails To Speed Up Production Cuts

Russia’s crude oil production stood at around 11.24 million bpd in the first 18 days of April, Reuters reported on Friday, citing an industry source. This means that the leader of the non-OPEC group part of the OPEC+ deal has yet to fall in line with the pledged production cuts.

As part of the OPEC+ production cuts between January and June, Russia is taking the lion’s share of the non-OPEC cuts and pledged to reduce production by 230,000 bpd from October’s post-Soviet record level of 11.421 million bpd, to 11.191 million bpd.

Moscow has repeatedly said that due to weather and geological conditions in the cold Russian winter, it cannot cut its oil production too quickly.

In March, Russia continued to gradually reduce oil production, but it missed its production cut target under the deal, according to data from Russia’s Energy Ministry.

As at the end of March, Russia cut its oil production by 225,000 bpd compared to October, excluding output from production sharing agreements (PSAs), while production was reduced by 190,000 bpd from October levels, if PSAs are taken into account, Russian Energy Minister Alexander Novak said in a statement carried by the Energy Ministry. 

Russian production in March stood at 11.298 million bpd, according to Energy Ministry data in tons, calculated in million bpd by Reuters using a 7.33 barrels/tons ratio.

In early March, Novak said that Russia would speed up its oil production cuts and plans to reach its share of the OPEC/non-OPEC output reduction by end-March or early April. Related: Huge Interest In Oil & Gas Defies This ‘Millenial’ Investment Trend

Over the past few weeks, reports have intensified that Russia may not be happy to extend the production cut deal with OPEC after it expires in June.

Meanwhile, Moscow plans to tap this year its National Wealth Fund for US$3.3 billion (210 billion rubles) to pay oil firms under a deal to keep gasoline and diesel prices low, Alexey Sazanov, head of the Russian finance ministry’s tax department, said on Friday.

In November 2018, after oil prices had reached a four-year high the previous month, Russia’s government and domestic oil companies and refineries agreed to freeze wholesale fuel prices to stop prices from going further up—a politically sensitive issue for Russian President Vladimir Putin who had seen his approval ratings drop to a 2012 low with an increase in pension age and higher prices at the pump seeping through inflation.

By Tsvetana Paraskova for Oilprice.com

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