Russia increased oil exports to an annual maximum in March

According to Kommersant, Russian oil companies in March, against the backdrop of problems with refinery utilization, significantly increased sea exports, which amounted to 3.8 million barrels per day. This is the highest level since May 2023. A significant increase in oil exports is associated with the redirection of flows from refineries that were damaged by drones. In April, the Russian Federation will reduce oil production and exports due to its obligations to OPEC+.

Marine exports of Russian oil in March 2024 increased by 5% compared to March last year, to almost 3.8 million barrels per day (b/d), according to Kpler data (available to Kommersant). This is a record figure since May 2023, when supplies abroad exceeded 3.9 million bpd. In January and February, the Russian Federation exported 3.5 million bpd and 3.3 million bpd by tankers, respectively.

Russia is forced to significantly increase oil exports against the backdrop of the retirement of part of its capacity due to accidents at refinery installations after Ukrainian drone strikes. The Energy Ministry expects the damaged plants to be operational by June. Among those affected by the attacks in March were the Nizhny Novgorod, Syzran and Kuibyshev oil refineries. In addition, at the end of March there was a technological breakdown at the Astrakhan Oil Refinery, which took several days to resolve. In early April, the Orsky Oil Refinery stopped operations due to floods; supplies are now being made from accumulated reserves. According to Kommersant’s interlocutors, a number of oil producing enterprises have already been forced to reduce production due to accidents.

In the second quarter of 2024, the Russian Federation will be forced to reduce oil production (excluding condensate) and exports as part of an agreement with OPEC+. Thus, in June, oil production should decrease to 9 million bpd, reported Deputy Prime Minister Alexander Novak. Condensate production in the Russian Federation is approximately 1.4 million bpd.

In early March, the Russian government pledged to voluntarily reduce the production and export of oil and petroleum products in the second quarter by 471 thousand bpd as part of “precautionary measures taken by OPEC+ countries to maintain the stability and balance of oil markets.” So, in April, the Russian Federation wants to reduce production by 350 thousand b/d, exports – by 121 thousand b/d, in May – by 400 thousand b/d and 71 thousand b/d; in June it will only reduce production by 471 thousand bpd. According to OPEC estimates, oil and condensate production in the Russian Federation will decrease in 2024 by 1.6%, to 10.75 million bpd.

Against the backdrop of OPEC+ decisions and geopolitical tensions in the Middle East, oil prices in the last week reached $90 per barrel of Brent. Given rising prices, production cuts should be less painful for oil companies.

Last year, the Russian Federation preferred to reduce oil exports rather than production, directing additional volumes to refining in order to increase fuel supplies to the domestic market. As a result, oil production at the end of 2023 decreased by only 1%, to 530 million tons.

Given the difficulty of increasing oil refining at least until June and seasonal repairs of oil refineries, Russian oil companies will be forced to reduce production due to obligations under the OPEC+ deal, Victor Katona from Kpler is sure. The Ministry of Energy has already given oil companies the task of cutting it down. The only question is whether production will be reduced by the entire promised 471 thousand bpd or less, the analyst notes. Considering that oil refining has now fallen by 350 thousand b/d compared to the beginning of the year, Mr. Katona continues, the production cut will probably be about 350–400 thousand b/d, that is, slightly below what is necessary. Gradually, with a decrease in production, seaborne oil exports will drop to the usual 3.5 million bpd, he concludes, this is the level at which shipments have been taking place in recent months.

Dmitry Kozlov