Russia meets Its OPEC+ target in may amid dirty oil crisis
Moscow. Russia’s average daily oil output in May fell below its OPEC+ target for the first time this year after buyers refused to take exports via Druzhba, the nation’s key pipeline to Europe, because of contamination.
The country produced just more than 47 million tons of crude oil and condensate in May, according to preliminary data from the Energy Ministry’s CDU-TEK unit. That implies a daily average of about 11.114 million barrels, which is 76,000 barrels a day below the cap for the nation set under the OPEC+ deal, Bloomberg calculations show.
May was the first full month of compliance by Russia this year, just weeks before the country meets with members of the Organization of Petroleum Exporting Countries to determine whether the cuts should be extended. Russia pledged to reduce its oil production under the deal by 228,000 barrels a day from the October baseline of about 11.418 million barrels a day.
For more than a month, Russia has suffered interruptions to its exports through Druzhba after the crude in the giant pipeline was found to be tainted with organic chlorides. Pipeline operator Transneft PJSC said in early May that producers were maintaining supplies to the Russian network, and Lukoil PJSC insisted the crisis hadn’t crimped its output. Analysts have been skeptical.
“All companies are saying the effect has been insignificant, but it was still there,” Ildar Davletshin, a London-based energy analyst at Wood & Co., said by phone before the CDU-TEK data was published. “On an annual basis, the impact is really small, but within one month it is quite visible.”
An earlier than expected start of maintenance at the Sakhalin Energy project, led by Gazprom PJSC, also contributed to Russia’s production decline in May, Bloomberg calculations showed.
Russia’s exports to countries outside the former USSR in May dropped to 20.17 million tons, or an average 4.77 million barrels a day, according to Bloomberg calculations based on Interfax data. In April, the exports stood at 20.75 million tons, or around 5.07 million barrels a day, Interfax data showed.
Russia has reached a clean-up arrangement with Belarus -- a transit country for Druzhba -- and restored flows via the southern leg of the pipeline, and has spare capacity in some parts. That means the Druzhba effect may disappear this month, VTB analyst Ekaterina Rodina said by phone ahead of the CDU-TEK report.
Still, Russia has yet to come to an agreement with Poland on resuming Druzhba supplies through the northern leg of the pipeline. While Russian officials expect to reach a deal to restart flows by June 10, much will depend on the outcome of talks between the two nations on Monday.