Russia's rising oil exports expose holes in output deal
Russia will export more oil to Europe in April than it has in any month since 2013 - despite Moscow's plan to sign a global agreement on freezing production in a bid to lift the price of crude.
The fact Russian exports are rising illustrates how hard it will be to enforce the deal, due to be finalised on April 17 in Qatar, and shows the potential for countries to use loopholes to keep exporting crude, blunting the intended impact on prices.
Russia can raise exports while keeping production flat by re-routing some oil away from refineries and into exports. Moscow says the freeze covers production, not sales abroad.
The International Energy Agency said on Wednesday the deal may be meaningless. Iran and Libya have said they will not participate, at least for now, and they plan to raise production.
Nigeria, the top oil producer in Africa, has said it expects oil exporters to agree a supply freeze in Doha next month but that it plans to boost its own output. The increase in Russian exports is mainly because of planned maintenance at refineries that reduced their capacity to process crude. It also reflects Russia's economic slump, which has reduced domestic demand for refined products. But another factor, according to one trader, is a desire by Russian producers to protect their share of the crude oil market in Europe, where Russia's traditional dominance is under threat from newly arriving Saudi supplies.
"Of course, no one said those markets belong to Mother Russia. This is purely commercial trade," said the trader, who spoke on condition of anonymity because he is not authorised to talk to the media. "But a marketplace is a marketplace, no one is going to give it up." Reports that members of the Organization of the Petroleum Exporting Countries as well as non-OPEC producers were discussing an output freeze have helped lift world oil prices from glut-induced 12-year lows hit in January.
Asked what would be covered by the agreement, Russian Energy Minister Alexander Novak told reporters: "The discussion is only about freezing production. And not exports."
The high level of Russian oil exports next month was confirmed to Reuters on Wednesday by export pipeline monopoly Transneft. According to the company, Russia is set to export 7 million tonnes from Baltic Sea ports in April, the largest volume since October 2013. That marks a 9 percent increase on the 6.41 million tonnes planned for export in March.