According to ship-tracking data cited by Bloomberg, shipments of Russian oil have begun to decline from the levels seen in February. This indicates that Moscow is following through with its plan to voluntarily cut oil production. On a four-week average basis, Russian seaborne crude exports have fallen by 205,000 barrels per day (bpd) to 3.21 million bpd in the period up to July 9. This is a decrease compared to the 3.38 million bpd recorded in the four weeks leading up to February 26.
In February, Russia announced its commitment to a voluntary reduction in oil production by 500,000 bpd, starting in March. This decision was made in response to Western-imposed price ceilings of $60 per barrel, which Russia deems unacceptable as a non-market mechanism. According to Bloomberg, the decrease in seaborne oil shipments can be attributed to reduced flows from Russia’s western ports, which used to deliver crude to the European Union before the imposition of Western sanctions.
However, Bloomberg also claims that the actual oil output cut by Russia is lower than the initially announced reduction of 500,000 bpd. The outlet cites figures from Russia’s Energy Ministry, which show that crude production in June averaged 9.599 million barrels per day, only 350,000 barrels per day lower than in February.
On the other hand, Russian refineries have increased their processing capacity to the highest levels in 12 weeks in the first days of July, fueled by strong demand for refined oil products abroad. This stands in contrast to the decline in crude exports.
The decrease in Russian oil exports comes after Saudi Arabia and Russia jointly announced further production cuts earlier this month. Saudi Energy Minister Prince Abdulaziz bin Salman described this move as “quite telling” teamwork between Riyadh and Moscow. Saudi Arabia extended its voluntary crude output cut of one million bpd for another month, including August, while Russia announced a 500,000 bpd reduction in exports next month. Together, these cuts will amount to 1.5% of global supply.
The Saudi energy minister emphasized the significance of Russia’s oil production cut, noting that it primarily affects exports, which can be measured more effectively than production. He also highlighted that the reduction was voluntary rather than imposed.
These developments reflect ongoing efforts by major oil-producing countries to stabilize global oil prices and manage the supply and demand dynamics in the market. By voluntarily reducing production, Russia and Saudi Arabia aim to prevent an oversupply of oil and support price levels.
It is important to note that Russia’s compliance with the pledged output cuts and the effectiveness of these measures in stabilizing the global oil market will continue to be closely monitored by market observers.