Russia is surpassing Saudi Arabia in oil exports for the first time since the Soviet Union's collapse as Prime Minister Vladimir Putin exploits Opec production cuts to gain market share.
Exports of crude and refined products from Russia rose to about 7.4 million barrels a day in the second quarter, according to energy ministry data. Saudi shipments fell to about 7 million barrels a day, International Energy Agency estimates of output and domestic demand showed.
Investors had expected Russian supplies to decline this year after Putin's deputy, Igor Sechin, told Opec in December that his government was ready to limit production to support prices. Instead, the country is providing tax breaks for new fields in Siberia. Rosneft, Lukoil and BP's Russian venture TNK-BP pumped more as prices rose 54 percent to near $69 (R525) a barrel.
«In no uncertain terms, Russia has been the biggest beneficiary of Opec's sacrifice," said Chris Weafer, the chief strategist at UralSib Financial. „Higher prices have equalled a $20 billion tax windfall.“
The extra barrels may hurt Opec efforts to cut inventories and keep members from exceeding their quotas after the group meets in Vienna today. Oil will fall 4.7 percent from the average so far this quarter to $64.50 a barrel in the third, according to the median of estimates compiled by Bloomberg.
Opec agreed during three meetings last year to reduce supplies by 4.2 million barrels a day, the biggest cutbacks in the group's history, after prices plunged $100 from the peak last July. Oil sank to $32.70 in January before rebounding.
Saudi Arabia has about 2.75 million barrels of daily capacity idle. Russia did not have the flexibility to switch wells off for months and turn them back on, so had minimal spare capacity, said Oswald Clint, an analyst at Sanford C Bernstein.
Russia's crude oil production rose 1.3 percent last month from a year ago, to 9.97 million barrels a day, and exports grew 5.9 percent, according to the energy ministry. This increase came after the largest producer, Rosneft, began pumping from its Vankor field in Siberia.
In March, while Russian politicians hinted at possible supply cuts, Lukoil chief executive Vagit Alekperov said his company aimed to raise output 1.5 percent this year.
«If Russian production had fallen as much as people had forecast, and it were 600 000 to 700 000 barrels a day lower than it is today, the market would be significantly tighter," said Edward Morse, the head of economic research at LCM Commodities in New York.
Russia already exports more energy than any other country, when including natural gas from state-run Gazprom, the world's largest producer. Gazprom's gas output alone last year was equivalent to 9.9 million barrels of oil a day, compared with Saudi Arabia's 9.2 million barrels of crude, according to estimates.
Russian gas sales to Europe will also benefit from Opec's effort to raise the value of crude because some gas contracts are linked to oil prices.
Opec president and Angolan oil minister Jose Maria Botelho de Vasconcelos said he expected the group would not make more cuts this week, echoing officials from Algeria, Iran, Iraq, Kuwait, Libya and Qatar.