(Bloomberg) -- Russia’s largest oil company is testing its capacity to bring back production it cut under a deal between Moscow and OPEC, telling investors it boosted output this week by about 70,000 barrels a day, Renaissance Capital said.
The output test was disclosed by Rosneft PJSC executives to investors and analysts visiting the company’s facilities in Siberia.
Russia and Saudi Arabia last week signaled they may start increasing oil supplies in the second half of this year in response to a surge in prices to a three-year high. The move though is yet to be approved by other members of the Organization of Petroleum Exporting Countries, triggering consternation ahead of a meeting of the group on June 22.
Rosneft “said it had started to ramp up production in the past three days to test the actual production limits ahead of the likely relaxation of OPEC+ constraints,” Renaissance Capital said in a note. “According to Rosneft, it has been able to recover 70,000 barrels a day of oil production in just two days, with more near-term production upside likely to support its 2Q18 results, in our view.”
The production test comments were also confirmed by three other people attending the Rosneft briefing. They asked not to be named discussing a closed-door presentation.
Ready for Changes
Rosneft is producing in line with quotas under the deal with OPEC, its press service said. “Yet, the company should be ready for possible changes” in the market situation, it said.
It’s not unusual for oil companies’ day-to-day production levels to fluctuate, and it’s not clear whether Rosneft’s output increase will be sustained, the people said.
Rosneft’s management said the company’s spare production capacity was 120,000 to 150,000 barrels a day, the Renaissance Capital analysts wrote. The Russian major believes it can add 100,000 barrels per day “in just a few days,” Aton LLC analysts said in a note Friday. Rosneft produced 4.57 million barrels a day of crude and other liquids in the first quarter, making up over 40 percent of Russia’s total output.
Russia’s partner in the output-curb deal, Saudi Arabia, is also lifting supply. The kingdom’s production rose to the highest in seven months in May, tanker-tracker Petro-Logistics said Thursday.
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