Russia’s oil production declined last year for the 1st time since 2008 and reached its lowest level since 2011 following a global deal to cut output and low demand due to the coronavirus.
According to an article by Reuters, Russian oil and gas condensate output declined to 10.27 million barrels per day (bpd) last year. The stats were provided by the country’s energy ministry data.
In tonnes, oil and gas condensate output dropped to 512.68 million in 2020 from a post-Soviet record-high of 560.2 million, or 11.25 million bpd, in 2019. The sharp decline was almost in line with expectations.
Reuters claimed that the 512.68 million tonnes from 2020 was the lowest result since 511.43 million tonnes in 2011, and the first annualized decline since 2008 amid the global financial crisis and falling oil prices.
Russia agreed to reduce its oil production in April last year by more than 2 million barrels per day, an unprecedented voluntary cut, along with other leading oil producers and OPEC. The move was designed to bolster the oil market over the fallout from the Covid-19 pandemic.
Since April, OPEC+ progressively reduced the cuts and is expected to release an extra 500,000 bpd into the market in January. It is worth noting that Russia has been expected to increase its oil output by 125,000 bpd from the New Year.
Russian deputy prime minister Alexander Novak said that Russia would support a gradual increase of OPEC+ output by another 500,000 bpd starting in February.
Darya Kozlova, an analyst at VYGON Consulting, a Moscow think-tank that advises the government, told Reuters that the market was in better shape now than it was in March or April when oil demand declined sharply at the height of the 1st wave of the pandemic.
“There is a deficit of around 3 million barrels per day on the market because of the actions by OPEC+“, she said. “Vaccination [against Covid-19] has started in many countries. So, we will probably see a tactical increase by another 500,000 bpd [agreed] in January. Further actions will depend on the market situation“.
In related news, oil prices rose to their highest since February 2020 after Saudi Arabia agreed to reduce output more than expected in a meeting with allied producers.
Namely, Saudi Arabia agreed to make additional voluntary oil output cuts of 1 million barrels per day in February and March, after a meeting with OPEC and other major producers that form the group known as OPEC+.
Reuters stated that the reductions agreed by Saudi Arabia were included in a deal to persuade other producers in the OPEC+ group to hold output steady.