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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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Russia Boosts Oil Production Before OPEC Meeting

Russia pumped 11.09 million barrels of oil daily in the first week of June, Interfax reported Saturday, citing an unnamed industry source. This is 143,000 bpd above the country’s quota under the OPEC+ production cut deal, and only about 100,000 bpd below the record-breaking production rate in November 2016, which Russia took as basis for its cuts.

Data from the Energy Ministry shows that Russia has been exceeding its quota for three months in a row as of end-May, at 10.97 million bpd. In the beginning of June, the most marked increase came from Rosneft.

The country’s top oil producer said earlier this month it had upped production by 70,000 bpd over just two days and could quickly ramp up by 100,000 bpd. Rosneft has a spare production capacity of 120,000-150,000 bpd.

Gazprom Neft also said recently that it is ready to start ramping up, recovering production to pre-deal levels within a month or two by adding 5,000 bpd.

Russia’s oil companies have made it clear they would rather pump more than seek to benefit from higher oil prices as a result of the production cuts.

The news of the higher June production weighed on prices as it came out on the heels of the latest Baker Hughes rig count report, which showed that the number of active rigs in the United States rose for the third week in a row. Rigs, S&P Platts noted, have been rising for 13 of the last 18 weeks. Related: The Real Reason For Higher Gas Prices

Meanwhile, the market is eagerly awaiting OPEC and Russia’s meeting on June 22, when the partners will discuss the future of the production cut deal after it became clear that $80 per barrel does not make the largest oil consumers in the world—or Russia and Iran, for that matter—happy. Many expect the meeting to end with a decision to gradually raise production, although some observers note it will be a tough decision to make due to different opinions within OPEC.

By Irina Slav for Oilprice.com

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  • Mamdouh G Salameh on June 11 2018 said:
    You need to look at average Russian oil production over a period of at least six months before accusing Russia of exceeding its production quota under the OPEC/non-OPEC production cut agreement. Production levels by most OPEC members including Saudi Arabia vary from one month to the other.

    Russian President Putin is committed to the production cut agreement and his strategic relations with Saudi Arabia for years to come. Therefore, he will not permit Russian oil companies to exceed the country’s production quota under the agreement.

    However, he may reverse his decision if Saudi Arabia acceded to President Trump's request to it to see that OPEC raises its production by 1 million barrels a day (mbd) to stabilze oil prices. In so doing, Saudi Arabia could risk unravelling the production cut agreement which virtually brought an end to the glut in the oil market and pushed prices to $80.

    OPEC members should aim at maximizing the return on their finite assets to the highest level that the global economy could tolerate. Judging by the robust fundamentals of the global oil market, I strongly believe that the oil price has a long way to rise before the global economy reaches its threshold of tolerance.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Neil Dusseault on June 11 2018 said:
    Oops...it seems someone forget to tell the market!

    Since 9 a.m. Central (10 a.m. Eastern on 6/11/18) WTI is once again doing what it always does:
    Hovering near the highs until prices suddenly jump several or more cents higher to make fresh new highs for the day (repeat over and over).

    Don't forget about Friday's bearish report from Baker Hughes oil rig count data (showing yet another increase). Or last Wednesday's EIA report showing a large build in crude stocks, more than expected, to keep supplies above the 5-year average. Or, the fact that the U.S. had record production--close to Russia and ahead of Saudi Arabia. Or, the fact that as I type, we still have a strong U.S. dollar against a basket of other currencies.

    So, then why are prices surging? I checked CNBC.com, their headline for oil reads:
    "Oil prices slip as US and Russian supplies grow". Really? That is 100% WRONG!
    I also checked Reuters, MarketWatch, even ZeroHedge...nothing. I'm sure something will be said as early as 4 PM Central (5 PM Eastern) if not later, in other words, after the markets have closed and the ability to trade off that data is already expired.

    Even this site (OilPrice.com) has no news as to why WTI is soaring today, other than last week's article on Venezuela, perfectly timed on the same Wednesday of the EIA report to distract traders from the slew of bearish data which purposefully left the sentiment of, "Oh, but...Venezuela!" I live in San Antonio, home of both Valero Energy and Tesoro (now Marathon Oil). I happen to know executives from both companies, from their CEO on down that have said they couldn't care less about Venezuela's terrible quality crude or their unreliability in general.

    Whatever. Perhaps today's movements should just add to the proof that oil bulls never have any right to complain, given the onslaught of bearish factors I mentioned are all ignored in favor of producers and oil bulls. No matter what is said and done, you guys always seem to get your way.

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