All Round View (Peshawar) : Oil production in Russia declined last year for the first time since 2008 and reached its lowest level since 2011 following a global deal to cut output.
Russian oil and gas condensate output declined to 10.27 million barrels per day (bpd) last year, according to energy ministry data cited by the Interfax news agency. 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 512.68 million tonnes reading for 2020 was the lowest since 511.43 million tonnes in 2011, and the first annualised 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 the Organization of the Petroleum Exporting Countries (OPEC). Since the April agreement, a record for global supply reductions, the group known as OPEC+ has progressively reduced the cuts and is expected to release an extra 500,000 bpd into the market in January.
OPEC+ is due to hold its next summit on Monday, Jan. 4. Russia has been expected to increase its oil output by 125,000 bpd from the New Year.
Russian Deputy Prime Minister Alexander Novak, in charge of Moscow’s ties with OPEC+, has said Russia would support a gradual increase of the group’s output by another 500,000 bpd starting in February.
Darya Kozlova, an analyst at VYGON Consulting, a Moscow think tank that advises the government, said the market is in better shape now than it was in March or April, when oil demand declined sharply at the height of the first 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.”
From 2003, global oil prices rose, allowing Putin to abandon reforms. The tipping point was the arrest of Mikhail Khodorkovsky, the main owner of the Yukos Oil Company, in October 2003 and the ensuing confiscation of Yukos.
Russia was among the hardest-hit economies by the 2008-2009 global economic crisis. The economy plunged 7.8% in 2009 as oil prices plummeted and foreign credit dried up. The Russian economy experienced two major shocks in 2014.
One shock was the sharp decline in oil prices during the third and fourth quarter of 2014. After fluctuating within a tight band near USD 105 per barrel from 2011-2013, crude oil prices ended 2014 at less than USD 60 per barrel. Russian annual oil output felled for the first-time last year since 2008.
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