Russia, Saudi Arabia discuss measures to stabilize oil market
16th June 2022 12:53 GMT

Russian Deputy Prime minister Alexander Novak discussed measures to stabilize the global oil market with Saudi energy minister Prince Abdulaziz bin Salman June 16, the Russian government said.

Russia and Saudi Arabia are key members of the OPEC+ crude oil production agreement, and the two ministers met at a time when Russian production has been significantly impacted by Western sanctions in response to the invasion of Ukraine.

Novak said Russian oil output was recovering and was up around 600,000 b/d month on month so far in June, Prime news agency reported June 16.

Novak said earlier June 16 that extending the OPEC+ deal beyond 2022 would depend on market conditions, which will be clearer by the end of the year.

"We have a long-term charter, but everything will depend on the market situation, whether some kind of quota will be necessary, or there will simply be cooperation within the framework of the charter," Novak said, according to Prime.

The OPEC+ agreement runs through the end of December but there has been much speculation about the alliance's policy up to the end of the year and beyond.

The invasion of Ukraine, related Western sanctions and high rates of inflation in major economies have led to talk that the group will make further changes.

OPEC+ has already agreed to accelerate its production rises through the summer, with July and August quotas rising about 50% higher than the previous typical 432,000 b/d monthly raises.

Some delegates have also floated the idea Russia could be exempted from its quota going forward while it remains under sanctions.

Output volatility

Oil production in Russia fell after the invasion of Ukraine triggered extensive Western sanctions and led traditional key buyers in Europe to significantly reduce purchases of Russian oil.

"We see that we have a fairly significant increase in June compared to May, up around 600,000 b/d," Novak said on the sidelines of the St Petersburg International Economic Forum, according to Prime.

Oil production was now close to February volumes, down around 300,000 b/d from pre-invasion levels, with the maximum dip at 1-1.1 million b/d, Novak said.

Russian crude production recovered by around 150,000 b/d in May, to 9.29 million b/d, according to the latest Platts survey by S&P Global Commodity insights.

That was below its quota of 10.55 million b/d under the OPEC+ agreement. Russia's quota increases to 10.66 million b/d for June.

Novak said all the prerequisites were there for further production increases in July, but exact volumes will depend on the plan of the companies, exports and supplies to the domestic market.

Russian oil exports fell slightly in June, and shipments to the domestic market were up, Novak said, providing no concrete figures.

Russia has not published oil production and supply data since April.

The destination of Russian oil exports has changed significantly since Russia invaded Ukraine.

The International Energy Agency said Russian oil export volumes to EU countries fell 170,000 b/d on the month in May, to 3.3 million b/d, in a monthly report released June 15.

European reluctance to buy Russian oil has led to the country's key crude grade Urals trading at significant discounts to Dated Brent.

Platts assessed Urals at $88.19/b on June 15, compared with Dated Brent at $128.16/b, S&P Global data showed. Prior to the invasion on Feb. 24, Urals was trading at a discount of around $10/b to Dated Brent.

Meanwhile, Russia has been ramping up deliveries to Asian markets.

China and India are the biggest growth market for Russian oil. The two Asian oil importers have now grown their share of Russian shipped crude to almost 30% and 20%, respectively, reflecting a combined growth of more than 1 million b/d on pre-war levels, according to Kpler shipping data.

Platts Analytics estimates that only half of the 1.9 million b/d of banned seaborne crude exports to Europe will be redirected to Asia. Russian production shut-ins will likely grow from 940,000 b/d in May to 2 million b/d by December, it said in a global political risk scorecard released June 9.

Russian refineries increased throughput in the first half of June compared to the same period in May, TASS reported, citing energy ministry data. Russia processed 10.39 million mt between June 1-14, 9.3% higher than last month. Throughput growth was attributed to increased processing at the Slavneft, Lukoil, Gazprom Neft and Rosneft refineries.

Russian refinery run cuts peaked in April, with output starting to rise in May, which was partly attributed to the end of seasonal refinery turnarounds.

In addition, the summer marks the start of higher seasonal demand for oil products in Russia, according to market sources, with driving expected to pick up to domestic tourist destinations amid restricted international travel and closed airports in southern Russia, which could boost gasoline demand.


Bunkerworld .,
16th June 2022 12:53 GMT