Russia’s January oil output cuts come below Novak’s estimate

MOSCOW (Bloomberg) -- Russia’s crude producers removed their first 42,000 bpd from the market in January under the OPEC+ output-cut agreement, slightly below earlier estimates of Energy Minister Alexander Novak. 

Russia produced 48.11 MM tons of crude oil, according to data from the Energy Ministry’s CDU-TEK unit published Saturday. This equals 11.376 MMbpd compared to the October baseline of 11.418 MMbpd under the OPEC+ pact, according to Bloomberg calculations. Earlier this week Novak said the January cuts may reach 50,000 bpd from the baseline.

The difference may be explained by the calculation methodology, as the Energy Ministry uses a different conversion ratio from tons to bbl for each individual field, while the Bloomberg calculations are based on the unified ratio of 7.33 bbl/ton.

Russia is lagging behind partners in OPEC, which as a group achieved 109% compliance in January, according to consultant JBC Energy. Last month the pace of Russian cuts drew criticism from Saudi Arabia, which has made the deepest reductions.

In Russia’s deal with OPEC in December, the nation pledged to reduce its monthly oil output by an average 50,000 to 60,000 bpd through the first quarter and to keep volumes capped in the second, with producers’ cuts corresponding to their domestic market share.

Surgutneftegas was the only Russian oil major that hiked its output in January from the baseline level, Bloomberg calculations show. The company increased its daily production by 10,700 bbl, which may also have contributed to lower-than-expected total output cuts in Russia.

Gazprom Neft made the most significant reductions in January, reducing output from its main units -- -- excluding joint ventures and subsidiaries - by 27,000 bpd from the baseline. Main units of Rosneft, Russia’s largest oil company, dropped their total daily output almost 19,000 bbl, while Lukoil made a cut of 7,000 bpd.

If the agreement holds, Rosneft will have to reduce its daily output by 80,000 bbl, while Surgutneftegas will need to cut almost 25,000 bbl, Bloomberg calculations show. Gazprom Neft’s cuts are set to reach around 16,000 bpd. Lukoil must pare its production by about 30,000 bpd, the company’s president and co-owner, Vagit Alekperov, has said.

While Novak has insisted that the harsh climate and geological conditions of many Russian oil-producing regions prevent sharp output cuts, the minister said this week that producers will try to accelerate their curbs.