Rus­sia’s Novem­ber oil out­put de­clines ahead of Opec+ talks

Gulf Times Business - - BUSINESS -

Rus­sia’s oil pro­duc­tion fell ahead of a cru­cial meet­ing with Opec this week to de­cide sup­ply strat­egy as prices slump.

Rus­sia pro­duced 11.369mn bpd of crude and con­den­sate last month, a 0.42% de­cline from Oc­to­ber, ac­cord­ing to pre­lim­i­nary data from the En­ergy Min­istry’s CDU-TEK unit. That was the first monthly de­cline in the na­tion’s oil out­put since the begin­ning of the year.

With Brent plung­ing more than 30% since early Oc­to­ber, Rus­sia and Saudi Ara­bia agreed on Satur­day to co-or­di­nate their ac­tions in the oil mar­ket next year, ex­tend­ing the so­called Opec+ agree­ment. While the de­ci­sion opens the door for a deal at the meet­ing Rus­sia and the Or­gan­i­sa­tion of Petroleum Ex­port­ing Coun­tries are hold­ing in Vi­enna this week, its de­tails, in­clud­ing the size of any po­ten­tial out­put cut, are still un­clear.

Rus­sia pump­ing at lower lev­els is not nec­es­sar­ily a sig­nal that its pro­duc­ers are re­turn­ing to out­put cuts be­fore the Vi­enna meet­ing has made any de­ci­sion. In­stead, sea­son­al­ity and fac­tors at in­di­vid­ual fields may be re­spon­si­ble, an­a­lysts said.

“This does not look like an in­ten­tional cut at all,” said Mak- sim Nechaev, di­rec­tor for Rus­sia at IHS Markit Inc. “In cur­rent mar­ket con­di­tions, the com­pa­nies aim to pump as much as they can to sup­port their rev­enue flow.”

Gazprom Neft PJSC, the oil arm of gas giant Gazprom PJSC, and Lukoil PJSC, Rus­sia’s sec­ond-largest oil pro­ducer, drove the de­cline in out­put last month, ac­cord­ing to CDU-TEK data. Gazprom Neft de­creased its pro­duc­tion by 4.71% on the Oc­to­ber level, while Lukoil’s drop reached 0.91%.

Ros­neft PJSC, Rus­sia’s largest oil com­pany, pumped slightly more than in Oc­to­ber at its key projects, ex­clud­ing joint ven­tures and the Bash­neft unit. Ros­neft’s East Siberian green­fields and the Soviet-era Samot­lor were the main out­put­growth sources for the com­pany. Rus­sia of­fers tax breaks for these fields, which could give Ros­neft an ex­tra in­cen­tive to raise pro­duc­tion there.

Rus­sia aims to keep its oil out­put near av­er­age Oc­to­ber lev­els un­til the year-end, En­ergy Min­is­ter Alexan­der No­vak told Tass news agency last week. This may im­ply that a slight pro­duc­tion growth is pos­si­ble this month even amid a fur­ther Brent slump. Rus­sian crude pro­duc­ers are re­silient to the cur­rent price de­clines as the flex­i­ble rou­ble ex­change rate and the tax sys­tem pro­vide a nat­u­ral hedge for their costs.

A Lukoil sign sits il­lu­mi­nated at the en­trance to the com­pany’s oil re­fin­ery in Nizhny Nov­gorod, Rus­sia (file). Rus­sia pump­ing at lower lev­els is not nec­es­sar­ily a sig­nal that its pro­duc­ers are re­turn­ing to out­put cuts be­fore the Vi­enna meet­ing has made any de­ci­sion. In­stead, sea­son­al­ity and fac­tors at in­di­vid­ual fields may be re­spon­si­ble, an­a­lysts said.

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