Page 131 - RusRPTApr21

11.7% on the month and 12.1% on the year to U.S. $60.78 per barrel in February, as seen by PRIME in the materials of the Finance Ministry on Monday. In January–February, the price fell to $57.6 per barrel from $58.13 per barrel in the same period of 2020. In 2020, the price fell 34% to $41.73 per barrel.
The amount of gas in European underground storages fell to below 36%
of capacity, Kommersant reports. Lifting gas from storage is going to continue for another month, which might bring the levels even lower by the start of the injection season. Gazprom is confident that this is going to support gas demand in Europe throughout the year, with market participants trying to build up sufficient gas stocks before next winter. An additional consideration is that the forward curve implies lower gas prices in mid-2021, which might spur gas purchases later on in the year. Overall, this is not a new tendency: it has been mentioned by Gazprom previously and has been acknowledged by the market, we think. The current spread between the Asian and the European spot gas prices has dropped from its January highs to just $19/kcm, which suggests partial LNG rechanneling to Europe putting pressure on the gas price. We note that the current TTF gas price is $200/kcm, while the May forward price stands around $192/kcm.
Last year, Russian crude oil production (incl. Gas condensate) was €512mn. tonnes (approximately 10.3mn barrels per day), which is 9% lower than the 2019 peak. The last time Russian oil production contracted was in 2008.
The decline in production is due to Russia's participation in the production limitation agreement signed by the OPEC + countries last spring. The agreement was signed because of the interest rate pandemic, global demand for oil fell sharply and world market prices collapsed. The agreement has supported the price of oil, together with a gradual recovery in demand, and participating countries have been able to gradually increase their production under the agreement in recent months.
The current production limitation agreement extends to early 2022, so it will curb Russian oil production this year as well. In OPEC's February market review, Russian oil production is expected to contract by a further 2% this year. The Russian Ministry of Economy estimates that oil production can recover quite quickly after the restrictions end and return to its pre-crisis level in 2023.
In the longer term, however, maintaining production at this level is estimated to require significant investment in new deposits. New deposits are often located in more difficult production conditions with higher production costs.
About half of Russia's crude oil production is exported directly and
131 RUSSIA Country Report April 2021 www.intellinews.com