Russia’s Main Oil Flows Signal Output May Finally Be in Sync with OPEC+ Pledge

(Bloomberg) -- Russia's two most-watched oil indicators — seaborne exports and domestic crude processing — are finally signaling that the nation may be in full compliance with its OPEC+ pledge to cut output.

Last month, a greater amount of crude was delivered to Russia's refineries, but exports by sea fell even more. The net result was a combined daily volume for those two crucial flows of just under 8.6 million barrels. 

That's almost 490,000 barrels below February levels — closely matching Russia's pledged production cut. 

Average daily oil flows by from Russian ports in the four weeks to July 30 dropped to 2.98 million barrels a day, the lowest level since winter, according to ship-tracking information monitored by Bloomberg and other sources. Meanwhile, the nation's refineries raised their processing rates to some 5.62 million barrels a day on July 1-26, the highest since March. 

The Bloomberg calculations do not include data on Russian pipeline and railway oil exports and supplies to the nation's inventories, which may also have some effect on the nation's total output figure for July and compliance with the output cut pledge. 

Most recently, in June, Russia exported around 4.29 million tons, or 1.05 million barrels per day by pipeline to Europe, China and former Soviet states, according to industry data seen by Bloomberg. 

Earlier this year, Russia pledged to cut its crude production by 500,000 barrels per day from the February baseline. It will keep that reduction in place until the end of 2024 in an effort to stabilize the global oil market jointly with its partners in the Organization of Petroleum Exporting Countries. It will also reduce exports by the same amount in August, without necessarily making additional production curbs. 

The nation's government has classified key oil statistics due to their “sensitive” nature, making it difficult to assess progress of the cuts beyond the assurances of energy officials. Russian-oil watchers have followed sea exports and domestic processing to estimate production levels. Until July, robust overseas shipments raised concerns in the market over whether Russia had made the output curbs in full. 

Russia's apparent compliance with its pledge comes as its partners in OPEC showed the largest drop in production since the historic 2020 cuts made during the coronavirus pandemic. July output from OPEC plunged by 900,000 barrels a day last month to an average of 27.79 million a day, according to a Bloomberg survey.

READ: OPEC Output Plunges by Most Since 2020 as Saudis Deepen Cuts

The group's de-facto leader Saudi Arabia delivered on the vast majority of the voluntary extra 1 million barrel-a-day cut it promised to make in a move to balance the market, the survey showed. Crude prices gained 14% in London last month, rising above $85 a barrel. 

Worsening refining margins from September, as well as seasonal maintenance, may force Russian companies to cut their crude-processing rates and hike their seaborne exports again. 

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