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While Russia is saying that it would undertake its share of promised oil production cuts, it is also saying it will be increasing its Urals crude oil exports in the first half of this year, leaving traders perplexed about how it is securing the additional exports while cutting production.
“Russia is reducing production ahead of schedule but exports are rising ahead of schedule too. I don’t quite understand how it is possible,” Reuters reported on Friday, quoting a source in the Russian oil market.
As part of the coordinated OPEC-non-OPEC supply cut, Russia has pledged to gradually reduce production by 300,000 bpd between January and June. According to information posted on the homepage of its energy ministry website, Russia’s Energy Minister Alexander Novak says that the country reduced its oil production by 117,000 bpd in January.
At the same time, transit and exports of Russian oil will increase by 5 percent in January through March, compared to the period October-December 2016, according to a December-dated quarterly schedule seen by Reuters.
Novak has said that it was important for Russia to cut production, not its exports.
At the beginning of December, after the joint OPEC/NOPEC plan to cut supply, the market naturally expected decreased Russian exports, which sent Baltic Urals prices soaring to the highest level in 15 years. But then the prices started falling after the market saw that Russia had no intention of reducing Urals crude exports in January or February.
Related: Oil Prices Head Higher On Positive Demand Outlook
Earlier this week, industry sources told Reuters that Russia upped loadings from Baltic Sea ports in February compared to initial plans, with oil companies Surgutneftegas and Lukoil set to export more than the final plan.
Production-wise, Russia says it is supporting OPEC’s efforts to cut output and even sits on the joint ministerial monitoring committee to monitor compliance to cuts.
Earlier this month, Novak said that global oil output was cut by 1.4 million bpd in January, and that “we are also noticing a significant decrease in speculative pressure to the prices.”
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.