Russia, the leader of the non-OPEC producers in the OPEC+ pact, is unlikely to deliver all the 100,000 bpd monthly increases under the agreement this year, analysts tell Bloomberg, in another bullish factor for oil market tightness and prices in the first half of 2022.
Under the OPEC+ agreement, Russia, like Saudi Arabia, is allowed to increase its oil production by around 100,000 bpd each month out of the total OPEC+ monthly production growth of 400,000 bpd.
Russia, however, has seen setbacks recently in its attempt to pump to its quota, and will likely continue to lag in the coming months.
According to analysts polled by Bloomberg, Russia may be able to raise its output by 60,000 bpd each month in the first half of 2022—just over half of the monthly production growth it is entitled to.
“We have a hard time seeing Russian suppliers maintaining 100,000 barrels-a-day production increases each month for the next six months,” Karen Kostanyan and Ekaterina Smyk, analysts at Bank of America, told Bloomberg.
Russia’s December oil and condensate output together totaled 10.903 million bpd, which was flat on November, suggesting it was using up all its available production capacity.
Russia doesn’t differentiate between crude oil production and condensate production in its official output figures. After years of debates within the OPEC+ group, Russia has won an exemption not to consider its condensate output as part of the production cut agreement.
Russia continues to say that it is hitting its oil production target. The country will pump 10.1 million bpd in January under the OPEC+ deal, Deputy Prime Minister Alexander Novak told TASS news agency last week.
Its target for February is 100,000 bpd higher—at 10.227 million bpd, according to the production table released by OPEC after the latest OPEC+ meeting earlier this month.
Russian supply will level off in the next two months, Francisco Blanch, head of global commodities at Bank of America, told Bloomberg last week, saying that triple-digit oil “is in the works” for the second quarter.
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.