Russia Continues to Reduce Oil Production in Line with OPEC+ Agreement

Commitment to OPEC+ Agreements

Russian Deputy Prime Minister Alexander Novak has confirmed that Russia has continued to reduce its oil production in May, in line with the OPEC+ agreements. This statement is a further reassurance to the market that OPEC+ producers are committed to the pact and to stabilizing the oil market. "Our reduction against April continued in accordance with our OPEC+ agreements," Novak announced at the St. Petersburg International Economic Forum.

Details of May Oil Production

When asked about the exact figures for May's oil production, Novak stated that the extent of the output cut would be clear in about a week. In early March, when OPEC+ members declared their intention to extend the cuts into the second quarter, Russia revised its production/export cut plan. It announced that it would reduce supply by 471,000 bpd in the second quarter through cuts to oil production and exports.

Breakdown of Reductions

In April, Russia committed to reducing production by 350,000 bpd and exports by 121,000 bpd. For May, the 471,000 bpd reduction would consist of a 400,000-bpd cut to production and a 71,000 bpd cut to exports. In June, the Russian supply cut would be 471,000 bpd, entirely from production reductions. Output cuts were expected to account for most of the additional Russian supply cut this quarter. This could be due to reduced refining capacity with maintenance in Q2 and refinery rates estimated to have slumped due to Ukrainian drone attacks on Russian refineries.

Compensation for Overproduction

Last month, Russia announced that it had "slightly exceeded" its oil output target under the OPEC+ pact in April and that it would compensate for the overproduction. The Russian Energy Ministry explained in a statement that the overproduction in April was "due to technical difficulties of cutting production in a large amount." The ministry reiterated at the end of May that "Russia is fully committed to the OPEC+ agreements, plans to compensate for shortfalls in production plans, and will soon submit to the OPEC Secretariat its plan to offset small variations from voluntary production levels."

Closing Thoughts

This development raises questions about the future of the global oil market and Russia's role within it. How will Russia's commitment to the OPEC+ agreement impact the global oil market in the long run? Will they be able to maintain their promised production cuts? Share your thoughts and discuss with your friends. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.