Russia Lacking Stocks to Influence Oil Market

Russia does not use stocks in tanks to help boost oil output and lacks sufficient stocks to influence the oil market, Russian Energy Minister Alexander Novak told reporters in Johannesburg, South Africa, late on Thursday evening. 

The country used stocks held in tanks at its oilfields to help boost crude production in June, three industry sources told Reuters in July, in a sign of supply flexibility as OPEC kingpin Saudi Arabia pushes other major producers to increase spare output capacity, Reuters reported. 

Russia does have some flexibility thanks to spare capacity in the Transneft pipeline system and in oil tanks at fields, the sources said. 

“Transneft of course has its own oil storage facilities for the technological process. But we of course do not have large (storage) capacity which would regulate the market,” Novak said. 

Russia does not have storage capacity for accumulating reserves, the minister said, adding that such a project would require a huge investment that may not provide an economic return. 

Its oil production last month rose by around 100,000 barrels per day from May. From July 1-15, the country’s average oil output was 11.21 million bpd, an increase of 245,000 bpd from May, two industry sources said. 

Novak said Russia has raised oil output by increasing oil production, not by using stocks. 

Speaking about global oil prices, he said the market remains volatile and responds to verbal interventions. But the current oil price has already taken into account risks related to US sanctions against Iran, he said. 

The Organization of Petroleum Exporting Countries and other oil producers led by Russia agreed last month to ease production curbs. The deal effectively increases combined oil output by 1 million barrels per day, of which Russia’s share stands at 200,000 bpd. 

Novak said partners in the OPEC+ deal are not currently discussing an option to boost production by more than 1 million bpd. He had previously said Russia and other leading oil producers may boost oil output further if supply shortages hit the global oil market.