Page 6 - FSUOGM Week 36

FSUOGM COMMENTARY FSUOGM

Russia, other OPEC+ members bring

back oil supply as demand stalls

The oil cartel eased back their cuts in August, but the oil demand recovery has slowed

RUSSIA RUSSIA and other OPEC+ brought back mil- in line with its OPEC+ quota, which covers oil
lions of barrels per day of supply last month but not condensate volumes.
WHAT: as expected, even though the recovery in oil Russia has shown in recent years it is able to
Russia and its allies demand shows signs of stalling. adjust its output quickly despite harsh weather
jacked up supply in Oil and condensate production in Russia conditions and the remote locations of its fields.
August, but demand is rose by 5.1% month on month in August, aver- When the latest OPEC+ cuts came into force, it
stalling. aging 41.7mn tonnes, or 9.82mn bpd, according was able to deliver on its quota – a reduction of
to data released by the energy ministry’s CDU nearly 2mn bpd – in merely two weeks.
WHY: TEK. This means they restored roughly 490,000 The Russian government has mooted plans
Weaker fuel demand in bpd of supply. to drill but not finish some 3,000 wells that can
the US and other markets Year on year, output was still down 12.7%. activated once OPEC+ cuts are eventually lifted
and higher Covid-19 All Russia’s vertically integrated companies completely in early 2022.
figures have weighed increased flows last month. Rosneft, excluding
down on prices. its Bashneft subsidiary, ramped up supply by Demand outlook
7.6% m/m to 3.6mn bpd, while Lukoil stepped Under their pact on output cuts, Russia and other
WHAT NEXT: up production by 4.4% to 1.4mn bpd. Tatneft members of the 23-country-strong OPEC+ car-
The outlook is bearish, and Surgutneftegaz expanded supply by 6.4% tel were allowed to restore some supply in August
with prices unlikely to and 6.0% respectively, while Gazprom Neft and that was taken offline from May to July. Saudi
reach pre-pandemic Bashneft raised output by 6.9% and 0.6%. Arabia and the rest of the 13-member OPEC
levels until 2021-2022. Russian gas production was up 6% m/m at group returned some 1mn bpd of production
1.72bn cubic metres per day, though this repre- last month, Reuters reported on September 1.
sented a 4% decline y/y. Gazprom drove the loss, The consensus is that compliance across both
decreasing flows by 6% y/y to 1.11 bcm per day, OPEC and the wider OPEC+ is now very high,
while no.2 producer Novatek increased extrac- despite initial problems. But although OPEC+
tion by 4% to 184mn cubic metres per day. Gaz- efforts have been instrumental in driving the
prom and Novatek both saw m/m rises, of 8% market recovery so far, demand is beginning to
and 5% respectively. stall just as the producers’ alliance has started to
In a research note, VTB Capital (VTBC) cal- taper off its cuts.
culated that Russia’s liquids output was broadly Oil consumption has now reached 90% of the

P6 www. NEWSBASE .com Week 36 09•September•2020