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Russia Rolls Back Most of Its Oil Cuts as Supply Risks Spread


August 1, 2018, by Elena Mazneva

(Bloomberg)

Russia has increased its crude production to levels not seen since it joined OPEC in a coordinated output cut two years ago, helping the group offset supply disruptions elsewhere.

The world’s biggest energy exporter boosted its oil production last month to just below the post-Soviet record set in October 2016, Energy Minister Alexander Novak said in a statement late on Wednesday. That’s equivalent to about 11.21 million barrels a day, a jump of 140,000 from a month earlier, according to Bloomberg calculations based on the ministry’s data.

Since Russia joined the Organization of Petroleum Exporting Countries in reducing output, crude prices have risen to three-year highs as the glutted market rebalanced. The cartel and its allies — known as OPEC+ — decided to increase production in June in response to consumers’ concerns over rising prices and supply disruptions, so traders and investors have been watching Russia’s oil data closely.

Russia’s production last month was just 40,540 barrels a day lower than October 2016, Novak said. The country has been lifting output following “joint efforts of OPEC and non-OPEC countries aimed at stabilizing the oil market,” he said.

OPEC’s own crude output increased by 300,000 barrels a day last month, according to a Bloomberg survey, as Saudi Arabia offset losses from an economic collapse in Venezuela, political clashes in Libya and an expected drop in Iranian exports due to U.S. sanctions.

In September OPEC+ may discuss whether a bigger production increase is needed, Novak said last month. Russia has already been ramping up output, led by its biggest producer — state-run Rosneft PJSC. In June, the country’s number of working oil wells increased by more than 2 percent from a year before.

Yet, Russia’s energy ministry has never publicly shared its estimate of the country’s spare oil capacity. Before the June OPEC+ gathering, analyst estimates varied from 215,000 to 500,000 barrels a day. Saudi Arabia had estimated its spare capacity at more than 2 million barrels a day. The kingdom increased its oil production by some 230,000 barrels a day in July — to 10.65 million — which is also close to an all-time peak reached in 2016.



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