Russian Exports May Suffer From Production Cut

Russia will apparently slash exports of Urals in March as part its plan to cut crude oil production by 500,000 barrels per day. The prevalent opinion has been that Moscow would bolster exports and reduce deliveries to refineries, but new information suggests it will do the opposite, at least for the month of March. Seaborne exports of Urals from Western ports could decline by some 25% next month, or 500,000 b/d to 1.5 million b/d, according to a report by Reuters citing industry officials, while preliminary refining schedules seen by Energy Intelligence indicate that Russia’s oil majors will maintain high throughput levels through March. Moscow appears to believe that curtailing supplies to the global market will buoy prices for Urals, the flagship export grade that remains heavily discounted at about $35 per barrel to Brent. Post-EU embargo, the vast majority of these barrels go to India and China, who have been attracted by the steep discounts and may now have to bid up cargoes. Russia’s seaborne exports from the Far East, or about 1 million b/d, will not be affected in March, according to the report. Refineries, meanwhile, want to take advantage of the last month of generous subsidies for domestic motor fuel sales before spring maintenance and a reduction in throughput. February runs are near 5.8 million b/d, or 350,000 b/d more than last year’s average, and preliminary crude delivery schedules for March show that this level will hold, if not rise.