Russia Sees Steepest Oil Production Decline Since May 2020 In Early April

Russian oil production fell in the first week of April by 4.5 percent compared to the March average—the steepest decline in output since May 2020, according to Russia’s energy ministry data seen by Bloomberg.

Between April 1 and 6, Russia pumped the equivalent of 10.52 million barrels per day (bpd) of oil, per Bloomberg calculations based on energy ministry data in tons. That’s some 500,000 bpd below the average Russian production for the whole month of March. If the trend continues throughout April, Russia could see its biggest monthly drop in oil production since May 2020, when it started voluntarily slashing its output as part of the OPEC+ deal.  

Buyers in the West continue to steer clear of Russian oil cargoes, and many analysts say it is a matter of time before at least some Russian supply comes off the market, despite the fact that signs are emerging that most of Asia is still buying Russian crude, at hefty discounts.

Russia’s production in March had already declined from February, albeit by a small margin. Russia pumped the equivalent of 11.01 million bpd of crude oil and condensate in March, according to Bloomberg calculations based on a report by Russian news agency Interfax. That’s 0.6 percent lower than the production in February.

The decline in March was the first such drop since August 2021, when a fire at a Gazprom processing plant in West Siberia held back some condensate production.

A report from last week also suggested that Russian oil production inched down in March from February, signaling that OPEC’s key partner in the OPEC+ deal has failed to take advantage of its some 100,000-bpd monthly increase allowed under the agreement.

In another sign that Russia could be struggling to sell all of its cargoes, Transneft, the Russian oil pipeline operator, has informed local oil companies that it would be capping the intake of yet-to-be-sold crude because of full storage, Reuters reported last week, quoting sources with knowledge of the plan.

By Charles Kennedy for Oilprice.com

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