Page 92 - RusRPTMay19

think the expansion of Power of Siberia could affect negotiations for a second pipeline, Power of Siberia 2.
Oil prices rose to their highest level since November 2018 on April 8 as prices went through the $70 per barrel level again, driven upwards by OPEC’s ongoing supply cuts, US sanctions against Iran and Venezuela, and strong US jobs data. International benchmark Brent futures were at $70.65 per barrel at 0441 GMT on Monday, up 31 cents, or 0.4% from their last close. US West Texas Intermediate (WTI) crude were up 31 cents, or 0.5%, at $63.39 per barrel. Brent and WTI both hit their highest since November at $70.76 and $63.48 a barrel, respectively, early on Monday.
European consumers pump less gas into underground storages y/y.
According to data from Gas Infrastructure Europe, there are 38.2bcm of gas left in European storage – c2.5x higher y/y. Abnormally warm weather led to higher gas supplies, Vedomosti, citing Gazprom – as well as a high base from the previous year from record sales to non-CIS, driven mainly by high demand after the cold winter of 2017-2018. Sales should pick up as weather normalizes. We expect the lack of sales resulting from higher storage to negatively affect Gazprom’s operating results, but, as the weather is returning to normal and Europe’s own gas output is falling, the trend should reverse in time.
OPEC raised forecasts for liquid hydrocarbon production in Russia to 11.54mn barrels per day from 11.49mn barrels per day in 2019, OPEC said in a report on Wednesday. The OPEC states reduced oil production by 534,000 barrels a day in March to 30.02mn barrels a day, mostly thanks to reduction in Saudi Arabia, Venezuela, Iraq and Iran, to overfulfil the OPEC+ oil output cut deal by 54%. The organization decreased its forecast for oil demand growth in 2019 by 30,000 barrels per day to 1.21mn barrels per day. Its estimate of oil demand growth in 2018 was decreased by 20,000 barrels per day to 1.41mn barrels per day. Demand in 2019 is projected at 99.91mn barrels per day. OPEC’s forecast for oil supply by states outside the organization in 2019 fell by 0.06mn barrels per day to 2.18mn barrels per day.
The International Monetary Fund (IMF) has slightly increased its forecast for global oil prices in 2019 and 2020 by US $0.2 to $59.16 per barrel and by $0.3 to $59.02 per barrel, respectively, the fund said in the April World Economic Outlook (WEO) on April 9. In 2018, the projected oil price stood at $68.33 per barrel.
Gazprom deputy Vitaliy Markelov wrote a letter claiming that Novatek's LNG exports to Europe have cost the budget $440mn in revenues it would have earned using piped gas. Gazprom has no reason to jump onto the LNG bandwagon as it earns more for the budget using pipelines. Markelov's letter is proof that a new fight over Novatek is brewing behind closed doors as Gazprom and Rosneft have both seen personnel shakeups for their gas export arms. The May decrees create a perverse incentive to resist too large an LNG expansion in the Arctic on budget grounds to finance social needs, but this is untenable if Russia wants to remain competitive internationally. LNG markets continue to grow more liquid and more integrated at the regional level, so expect more and more desperation from Gazprom unless it brings Shell back into Baltic LNG. Just as Gazprom has reached record export figures for Europe in recent years, Novatek has become the single largest provider of LNG to European consumers during February, during, which Gazprom's exports to Europe reportedly dropped 13%. Gazprom estimates that exports to Europe
92 RUSSIA Country Report May 2019 www.intellinews.com