Russian Output Cuts May Extend Past March

Copyright © 2023 Energy Intelligence Group All rights reserved. Unauthorized access or electronic forwarding, even for internal use, is prohibited.
Fly Of Swallow Studio/Shutterstock

Russia's voluntary crude oil production cut of 500,000 barrels per day could last longer than this month, Energy Minister Nikolai Shulginov has indicated. An extended cut could help support oil prices, which fell sharply this week due to concerns about another banking crisis. Oil market developments will inform Russia's approach, with analysts saying that steep discounts for Russian Urals crude and a lower G7 price cap could prompt Moscow to extend the cuts. Russia must find the right balance, however, since lower volumes pose a risk to the state budget. According to Russia's finance ministry, the Urals price averaged $50.80 per barrel from Feb. 15 through Mar. 14, a bit higher than the $49.56 per barrel in February but still much lower than the $70.10/bbl assumed in the state budget. The US and EU are reportedly considering a $5/bbl reduction to the current $60/bbl price cap or not changing it at all, while Poland, Latvia and Lithuania are pushing for an even lower rate. Shulginov repeated that the cuts would reduce Russia's crude oil and gas condensate output this year. Production in 2022 averaged 10.72 million b/d and came in at 11.04 million b/d last month. Opec in its most recent monthly outlook sees Russian production at 10.3 million b/d this year, while the International Energy Agency is in the same ballpark at 10.35 million b/d. However, Russia's official forecasts are less optimistic, envisaging a possible decline to as low as 9.8 million b/d.

Ukraine Crisis, Oil Supply, Sanctions
Wanda Ad #2 (article footer)
The long-term future is net zero, but the European majors are figuring out the best path to get there as oil demand remains resilient.
Thu, Mar 23, 2023
Oilfield service companies in Russia expect reduced demand from customers as a result of Moscow's decision to scale back crude production.
Fri, Mar 24, 2023
Denmark has asked a Gazprom unit to take part in the salvage of an object found near the damaged Nord Stream 2 gas pipeline.
Fri, Mar 24, 2023