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Global Intelligence Report - 17th April 2019

Global Intelligence Report - 17th April 2019

As Libya continues to capture…

OPEC Production Cuts: Is Russia Complying?

oil storage

Russia’s oil production held onto an 11-month high in April, flat compared to March and above its quota under the OPEC/non-OPEC deal for a second consecutive month, according to data by Russia’s Energy Ministry.

Russia pumped a total of 10.97 million bpd of oil in April, unchanged from March, and slightly above its quota under the production cut deal, according to energy ministry data, as carried by Reuters.

Russia’s pledge in the OPEC/non-OPEC deal is to shave off 300,000 bpd from its October 2016 level, which was the country’s highest monthly production in almost 30 years—11.247 million bpd.

Last month, production at the larger Russian companies increased, while a decline at the smaller firms offset that growth. Production at Rosneft, the largest Russian oil company, inched up by 0.1 percent in April over March, while Gazprom Neft—which has an ambitious production growth plan—saw its oil production increase by 0.9 percent month on month. The combined production of the smaller oil companies decreased by 0.9 percent last month, offsetting the production gains at the bigger producers.

After three months of steady output, Russia’s crude oil production increased in March to 10.97 million bpd, the highest level since April 2017, as the top two Russian companies— Rosneft and Lukoil—boosted their production.

Related: Russian Oil Turns Its Back On Its Biggest Customer

Russia is leading the non-OPEC group of oil producers part of the pact with OPEC to cut production in order to draw down inventories and boost oil prices. Analysts and official figures are already estimating that global oil stocks in developed economies are very close to or already within the five-year average—OPEC’s metric for the deal’s success.

Nevertheless, OPEC’s leader Saudi Arabia insists that there is more work to be done and the cuts should continue by the end of this year, as planned. Russia is more careful in comments, although it has repeatedly said that it is committed to the deal. Last month, Russia’s Energy Minister Alexander Novak said that at the June meeting, OPEC and allies could discuss ‘easing the cuts’ until the end of the year.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh G Salameh on May 03 2018 said:
    Russia is maintaining its commitment to the OPEC/non-OPEC production cut agreement by continuing to cut 300,000 barrels a day from its overall production.

    While the annual average of Russia’s daily production amounting to 10.947 million barrels a day (mbd) conforms to its commitment to the production cut agreement, there are sometimes variations where one month production exceeds the average going to 10.97 mbd followed by underproduction to 10. 90 in the next month.

    Unlike OPEC members’ oil production where government-owned oil companies can virtually implement the cuts immediately once the order is given, Russia’s oil production is the total production of many large and small companies who might not be able to synchronize their production to the minute and the day, hence the variations.

    As long the average daily production continues to meet the terms of the production cut agreement, there will be no issue between OPEC and Russia.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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