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Russian oil output down 100,000 b/d in January after global deal

Russian oil output

As Russian oil output drops and American production increases, a former Russian energy minister says he hopes the US will join the deal to cut global oil production. Bashneft photo.

Russian oil output at 11.11 million b/d in January

By Olesya Astakhova and Vladimir Soldatkin
MOSCOW, Feb 2 (Reuters) – Russian oil output contracted in January by 100,000 barrels per day, led by decline at all the major domestic producers and following a global accord aimed at eliminating oversupply and supporting oil prices, Energy Ministry data showed on Thursday.
Russian oil output, one of the world’s largest, declined for the first time since August. The decrease showed that Moscow is serious in its pledges to reduce production of oil, its chief commodity exports and key supplier of budget revenues.

January marked the start of planned output cuts by 11 members of the Organization of the Petroleum Exporting Countries and other producers led by Russia under a deal reached on Dec. 10.

Russian oil and gas condensate output declined to 11.11 million b/d from 11.21 million b/d in December. In tonnes, oil output fell to 46.992 million from 47.402 million in December.
Top Russian producer Rosneft cut output in January by 0.5 per cent month on month, Lukoil cut by 1 per cent, Surgutneftegaz cut by 1.2 per cent and Tatneft by 3.7 per cent.
The data does not take into account production at subsidiaries and joint ventures.
Russian oil pipeline exports rose to 4.409 million b/d from 4.358 million. Moscow has said that the deal was related exclusively to production, not exports.
OPEC, Russia and other producers agreed to cut oil production by a combined 1.8 million b/d in the first half of 2017. Russia pledged to reduce 300,000 b/d by the end of the first half.
A Reuters survey this week put compliance with the OPEC deal at 82 per cent, above the initial 60 per cent achieved when a similar deal was implemented in 2009.

Market watchers have focused on the level of compliance to those promises as in the past the OPEC members have often failed to stick to their pledges.

Russian Energy Minister Alexander Novak said on Wednesday that global oil output was cut by 1.4 million b/d last month.
Since Nov. 30, when OPEC announced a production target of 32.5 million b/d, oil prices have jumped by around a fifth to $56.5 per barrel, comfortably above the $40 per barrel average envisaged in Russia’s budget for 2017.
Novak has said he expects global oil prices at between $50 and $60 per barrel this year. He has said Russia aims to cut production by 200,000 per day by the end of first quarter and reduce it by 300,000 b/d thereafter.
“Russia’s approach to cutting would only foresee a gradual decrease in production as of the end of Q1. Consequently, while OPEC cuts seem to be well underway – asserting confidence in the deal – there is still some way to go for non-OPEC,” Vienna-based JBC Energy said in a note on Wednesday.
“Moreover, signals from the U.S. continue to indicate a more rapid rebound in U.S. crude production, which could counter some of the non-OPEC contributions to the cuts.”

Igor Yusufov, Russia’s energy minister from 2001 to 2004, and who oversaw Moscow’s first deal with OPEC, told Reuters that Russia and OPEC should bring the United States into the global deal on oil output curbs as the U.S. was ramping up its production.

“The U.S. should be invited into the dialogue, the essence of the current events should be explained to them… We are partners and as two oil exporting countries we should coordinate work on the supply volumes, take care of prices stability,” he said.
A U.S. government report released Tuesday showed that crude production in the United States rose for the second consecutive month in November.
Russia and OPEC have said they were not worried by rising production in the United States as an increase in output there would be absorbed by rising demand.
(Additional reporting by Oksana Kobzeva; writing by Vladimir Soldatkin; editing by Katya Golubkova and Jason Neely)

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