Oil could hit $70-$75/barrel by mid-year: CME trader
The expected increase in Russia’s February oil output has so far failed to materialize, with some fields forced to curb pipeline flows due to abnormally cold weather.
The OPEC+ member pumped 1.38 million tons a day of crude and condensate on average from Feb. 1 to 15, according to two people with knowledge of production data, who spoke on condition of anonymity. That equates to a daily rate of 10.115 million barrels, about 44,000 barrels lower than January’s level.
Russia was one of only two countries assigned a more generous production ceiling for this month under the OPEC+ deal. The country, along with its neighbor Kazakhstan, saw its February quota increase by 65,000 barrels a day, even as other members of the cartel kept output steady, or in the case of Saudi Arabia cut deeper.
If Russia’s production of condensate -- a light oil extracted from natural gas -- in the first weeks of February was in line with January levels, then daily crude production would be about 9.175 million barrels, some 8,000 barrels a day lower than the country’s quota, according to Bloomberg calculations using a 7.33 barrel-per-ton conversion ratio.
That would be the first time Russia pumped less than its quota under the agreement reached between the Organization of Petroleum Exporting Countries and its allies last year. Since May, Russia’s compliance with the OPEC+ pact averaged 95% and remained at that level in January, according to the International Energy Agency.
Since the start of February, Russia’s pipeline operator Transneft PJSC has recorded lower crude flows on a regular basis at some Siberian intake points from certain producers, citing very cold weather as one of the reasons.
Temperatures in east Siberia, where many of Russia’s newer oil fields are located, plunged as low as -59 degrees Celsius (-74.2 Fahrenheit) in early February, according to the nation’s Hydrometeorological Research Center.
Russia’s emergency ministry issued weather warnings for some areas in west Siberia, the nation’s main oil province, where temperatures dropped below -30 degrees Celsius. The weather in some Siberian regions may get milder in the second half of the month, according to the research center.
Abnormally low temperatures have been disrupting energy supplies across the world since the start of the year, leading to higher prices for oil and gas. The coldest winter in 30 years has resulted in supply losses of more than 2 million barrels a day in the U.S.
The last time a severe winter led to cuts in Russian oil production was early 2017, at the start of the nation’s cooperation with OPEC. Back then, the energy ministry estimated the cold spell resulted in output reductions of some 5,000 to 10,000 barrels a day on average in early January.