Russian Oil-Output Growth Losing Steam as OPEC+ May Review Plans
(Bloomberg) -- Russia’s oil-output growth has slowed this month, as the nation’s producers are running out of spare capacity. This could give OPEC’s main ally a reason not to oppose any move by the producer group to ditch its plan to raise output next week.
Average daily crude oil and condensate output was 1.486 million tons on Nov. 1-24, according to the data from the Energy Ministry’s CDU-TEK unit, seen by Bloomberg. That equates to 10.89 million barrels a day, based on a 7.33 barrel-per-ton conversion rate.
That is a modest 0.49% increase month-on-month, and compares to a 1% rise for October and 2.8% in September. August output fell, when Gazprom capped output at its largest condensate-treatment plant in West Siberia after the fire.
The nation’s top producers indicated earlier this month they’re pumping at near full capacity as the Organization of Petroleum Exporting Countries and its allies ease output curbs.
OPEC and its allies are increasingly inclined to ditch their plan to raise output next week, as a new virus variant triggered oil’s worst crash in over a year, according to delegates who declined to be identified. The group was already considering a pause after the U.S. and other consumers announced the release of emergency oil stockpiles on Monday. It remains unclear whether Russia is also in favour of ditching the planned production hike next month.
Until now, Russian producers have been raising output mainly by restoring production at wells closed in 2020 or increasing flows from operating wells. To ramp up output next year, they will need to focus on drilling new wells.
Earlier this week Lukoil PJSC, the second-largest producer in Russia, said that it has restored its production to almost 90% of pre-crisis level of the first quarter 2020. “We’re close to full utilization of spare capacity and further production growth will be supported by additional drilling,” Vice President for Finance Pavel Zhdanov said Nov. 24.
This echoed Gazprom Neft PJSC, who said last week that it won’t have idled oil-output capacity by the end of the year and will keep increasing drilling rates to raise output. Earlier this month, Rosneft PJSC, nation’s biggest oil producer, said it used ahead of time its reserve production capacity of 25,000 tons a day (some 183,250 barrels a day), which was available at the end of the second quarter, and “promptly increased crude-oil output to ensure compliance with agreed OPEC+ quotas” for Russia.
As CDU-TEK data doesn’t provide a breakdown between crude and condensate, which is excluded from the OPEC+ agreement, it’s difficult to assess Russia’s adherence with the deal. Last month, Russia was over-producing with its compliance held at 92% in October, the International Energy Agency said in its latest monthly report.
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