- Russian oil output edges up in June to 10.84 million b/d
- Output still at historically high levels close to 11 million b/d
- Rosneft output slides beneath 4 million b/d target
- There may be some political pressure to keep output high
Russian oil output continues near the 11 million b/d mark. Photo: iStock
By Nadia Kazakova
Crude oil and gas condensate output in Russia was 10.84 million barrels/day in June. It is up 1.4% on last year and 0.15% higher than in May 2016. After a spike in the first quarter of 2016 at above 10.9 million b/d the oil output has now stabilised at around 10.84 million b/d in Q2 2016.
Russian crude oil and gas condensate output in June 2016, million b/d
Source: www.tass.ru, www.minenergo.gov.ru
Exports stayed at above 5 million b/d in June, up 4.7% year-on-year. There was, however, a noticeable drop of 3.4% month-on-month. Oil and gas companies have shipped more oil to refineries in June, almost the same amount at last year (only down 0.93% y/y after a 7.6% y/y drop in May) and up 4.7% m/m. It might have been a combination of firmer domestic margins and some increase in domestic demand.
The output by company was relatively stable, with some monthly losses for Rosneft and Lukoil. Both companies had a 0.35% m/m drop in output, offset by slight monthly gains from GazpromNeft and Bashneft.
It is a bit of a disappointment to see Rosneft output to drop below 4 million b/d (reported number covers main subsidiaries, not fully consolidated). But it is probably too early to see it as a failure of the company to deliver on its promise to start increasing production from May onwards.
Crude oil and gas condensate output by company in June 2016, million b/d
There was actually very little movement in Russian oil output throughout Q2 despite rising oil prices. The production was actually off its January peak when the Urals oil price averaged under $29/b.
The usual explanation is that Russian production is dominated by larger oil companies with rigid development plans, marginal fields are kept in production regardless of the oil price due to infrastructure/cost constraints and the margins are satisfactory due to rouble devaluation.
Russian crude oil and gas condensate output and average Urals oil price
Source: www.interfax.ru, www.minenergo.gov.ru, www.tass.ru
There might be also some political pressure to keep output at a certain level to meet budget revenues targets. It would mean that oil companies would have higher than expected and probably less efficient (for the level of the oil price) capital expenditure in the coming years (if the oil price remains at around $50/b).
It is something to watch for, as it would affect company cash flows, their ability to maintain dividends and, as a result, their valuations.
There may be some political pressure on oil companies to keep output high. Photo: iStock