Media: Russia increases oil production and exports

Updated: Jul 14

The ability to efficiently reroute supplies will be necessary for a sector to fully recover after the sanctions, analysts believe.

Following a dramatic decrease in April, Russian oil production increased by 5% last month, the newspaper Vedomosti reported on Friday, citing an industry source.

Production in May totaled 10.2 million barrels per day, up from 10 million in April but still 2.5% below May 2021 production.

According to Alexander Novak, the deputy prime minister of Russia, oil production in 2022 may fall from 524 million tonnes in 2021 to 480–500 million tonnes. However, the official said that this month's production is expected to gradually increase by roughly 1 million barrels per day.

The Vedomosti article states that between January and May, Russian oil producers boosted their output by almost 3.5% in comparison to the previous year, reaching 219.9 million tonnes. Surgutneftegaz (up 13%), Lukoil (up 10%), and NNK were the leading companies in this (up 9 percent ).

Statistics reveal that oil exports increased by roughly 13 percent to 102.7 million tonnes. Despite some foreign oil merchants being cautious to purchase Russian petroleum due to the possibility of secondary penalties, this has happened.

Russian oil is currently subject to an embargo imposed by the US and UK, and on Thursday, the EU approved a partial restriction. The EU will no longer be able to buy Russian oil by sea after the sixth round of sanctions by the bloc. The Druzhba oil pipeline import limits, however, have been delayed. The embargo on Russian oil supplies has been temporarily lifted for the Czech Republic, Hungary, and Bulgaria.

Discounts on oil have been extended by Russia to tempt potential customers, analysts claim, keeping the country's supplies competitive despite the Western embargo. For instance, compared to May of last year, Russian oil exports to India increased by about 25 times. Exports to China increased as well, reaching 6.55 million tonnes in April, a 4 percent year-over-year increase. Russia is China's second-largest supplier of goods, after Saudi Arabia.

In the upcoming months, experts forecast that Russian producers will keep shifting export flows toward Asian markets, ensuring a further recovery in production. Refinitiv predictions predict that Russian oil supplies to India could reach a record 900,000 barrels per day, while extra sales to the Chinese market might reach 400,000 barrels per day as the nation's demand picks up following the recent Covid-19 lockdowns.

Nikita Blokhin, a senior analyst at Alfa-Bank, told Vedomosti that if European consumers' refusal to purchase sea shipments of Urals is gradual, "we can safely assume that all the falling export volumes will be redirected to Asia within one and a half to two months," adding that a further shift of export flows to Asian markets will aid in stabilizing production at the level of 10.3 million barrels per day.

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