Russia increases oil production

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Oil prices rose sharply at the beginning of the week. This was because, on the one hand, Saudi Arabia and other OPEC countries announced that they would cut oil production, and on the other hand, Russia promised to continue the previously announced production cut until the end of 2023. Russia wanted to reduce production by 500,000 barrels per day in response to the ceilings imposed by the G7 and Switzerland.

But production cuts in Russia don’t look like that at all. In the last week of March, Russia’s crude oil shipments increased by 1 million barrels to a new peak of 4.13 million barrels per day. This is based on tanker surveillance data compiled by Bloomberg. The four-week moving average rose to its highest level since June. These export figures do not indicate that the announced deduction has been implemented.

Where is the oil going?

The increase in crude oil shipments is linked to the fact that the Druzhba pipeline to Poland and Germany is no longer active. Instead, oil is increasingly being shipped by sea, primarily to China, India and Turkey. Some tankers also go to places that are not announced at the start of the voyage. Flows to China and India are at all-time highs. While deliveries are made to Africa, transfers are made to other ships in the Mediterranean.

Crude oil exports from Russia to European countries by sea rose to 104,000 barrels per day again as of March 31. All this oil was shipped to Bulgaria; Export to Turkey is not included.

Flow from crude oil export tariffs to Kremlin coffers increased $14 million in the last week of March to an 11-week high of $56 million. Median earnings rose $4 million last month to a seven-week high of $47 million.

Why is it not reduced?

The Kremlin’s financial needs, such as the war in Ukraine, only partially explain why production was not interrupted. Bloomberg suspects that maintenance work at Russian refineries has already caused a production cut, thus making further production cuts impossible. On the other hand, there is an assumption that strategic partners in the Asian region are now increasingly “lubricated” with crude oil. The upper price limit does not apply there either.

However, it is safe to assume that the majority of Russian oil sales are below the US$60-per-barrel limit set by the G7, as Western insurers insure more than half of Russia’s tanker fleet.

Source :Blick