Russia to Raise Urals Crude Export Despite Supply Cuts

While Russia is saying that it would undertake its share of promised oil production cuts, it is also saying it will be increasing its Urals crude oil exports in the first half of this year, leaving traders perplexed about how it is securing the additional exports while cutting production.

“Russia says it is reducing production ahead of schedule but exports are rising ahead of schedule too. I don’t quite understand how it is possible,” a source in the Russian oil market was quoted as saying on Saturday by Oil Price.

As part of the coordinated OPEC and non-OPEC supply cut, Russia has pledged to gradually reduce production by 300,000 bpd between January and June.

Russia’s Energy Minister Alexander Novak says that the country reduced its oil production by 117,000 bpd in January, according to Russian Energy Ministry's website.

At the same time, transit and exports of Russian oil will increase by 5% in January through March, compared to the period October-December 2016, according to a December-dated quarterly schedule seen by Reuters. Novak has said that it was important for Russia to cut production, not its exports.

At the beginning of December, after the OPEC supply cut deal, the market naturally expected decrease in Russian exports, which sent Baltic Urals prices soaring to the highest level in 15 years. But then the prices started falling after the market saw that Russia had no intention of reducing Urals crude exports in January or February.

Last week, industry sources said that Russia upped loadings from Baltic Sea ports in February compared to initial plans, with oil companies Surgutneftegas and Lukoil set to export more than the final plan.

Russia says it is supporting OPEC’s efforts to cut output and even sits on the joint ministerial monitoring committee to monitor compliance to cuts.