Measurement and Testing

  • Is Russia Pumping Too Much Oil?

Is Russia Pumping Too Much Oil?

Nov 03 2019 Read 407 Times

While oil and gas markets are reeling after facing some of the most damaging supply disruptions in decades, the latest Bloomberg calculations based on CDU-TEK data released by the Energy Ministry suggest that Russia’s average daily oil output significantly exceeded OPEC+ targets in September and October. Energy minister Alexander Novak has confirmed that the Federation is "aiming to comply" with OPEC+ sanctions moving forward, though figures suggest Russia will continue to pump well above its quota in November.

Russian oil blamed for flooding the market

Following recent attacks on Saudi Arabian energy infrastructure, OPEC production figures plummeted by the most drastic levels seen in more than 15 years. Though despite the blow to supply, oil prices remained fixed in the US$60 per barrel range for most of 2019. Far from suggesting the market is facing a supply shortage, the figures reflect a scenario where Russian oil is flooding the market and preventing prices from stabilising.

Russian and Saudi Arabian markets could face "considerable peril"

In a recent Russian Energy Week conference attended by Saudi state minister for energy affairs Prince Abdulaziz bin Salman, Novak confirmed the Federation will continue cooperating with Saudi Arabian firms. The comments drew criticism from industry experts such as Rapidan Energy Group president Bob McNally, who warns that prices may continue to slide and place Russian and Saudi Arabian markets in "considerable peril."

"Oil-demand growth is hitting the skids as macroeconomic, trade, and political risk drivers continue to intensify, from Brexit to impeachment through Persian Gulf conflict risk and the U.S.-China trade war," he said.

Low oil prices "just fine" for Russian economy

Instead of cutting production, analysts predict Russia will sidestep OPEC cuts and use concerns regarding trade wars and the state of the global economy as an excuse to ramp up production. Recent comments from President Vladimir Putin suggest the country isn't concerned about the current state of the market, with the leader asserting that prices of around US$60 to US$65 a barrel suit Russia “just fine” given the country's surplus-running budget. That said, experts claim that if Russia plans to boost spending in the next three years and revive its lethargic economy, pushing up oil prices should be a top priority.

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