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OPEC upgrades Russia’s 2017 oil production outlook

OPEC has upgraded Russia’s oil production outlook for this year by 2,000 barrels per day versus its previous estimate to 11.16 million barrels per day, according to the Monthly Oil Market Report released on Thursday.

Previously this year’s average daily crude oil production was expected at the level of 11.14 million barrels.

Oil production in Russia in April averaged 11.18 million barrels per day, representing a decline of 100,000 barrels per day compared to average production in 1Q17, the report said. In terms of crude oil production, preliminary estimation indicate a similar decline of 100,000 barrels per day, lowering output in April 2017 to 10.39 million barrels per day.

"The largest drops in output were in small and independent companies, while, for example, oil production was increased at the Novoport and Prirazlomnoye projects operated by Gasprom Neft. However, other major companies such as Rosneft, Lukoil and Bashneft produced less than the October level, as a benchmark for production adjustment, or kept it steady. They managed their production by adding output from greenfields and lowering production at brownfields," OPEC said.

Russia has made a commitment to cut its crude production by 300,000 barrels per day starting January 1, 2017 versus October 2016, or 2.7 percent, as part of the oil output cap deal with OPEC. In early May, Russia’s Energy Ministry reported the targeted production level had been reached. The country will keep its current oil production level until June 30, 2017 when the agreement expires, Energy Minister Alexander Novak said earlier.

The OPEC deal

Eleven OPEC countries participating in the oil output reduction agreement reduced production in April 2017 by 1.09 million barrels against October 2016, taken as the base level, to 29.674 million barrels per day (bpd), according to the Monthly Oil Market Report of the Cartel (in comparison with the updated indicators of the November report).

In October, 11 countries participating in the agreement produced 30.769 million bpd.

Thus, Saudi Arabia reduced production by 612,000 barrels to 9.954 million barrels, having fulfilled its quota by 131 percent (468,000 barrels). Iraq, the second largest producer after Saudi Arabia, cut production by 198,000 barrels to 4.373 million barrels (quota of 210,000 barrels, 94 percent). The United Arab Emirates reduced production in April by 226,000 barrels to 2.842 million barrels (quota - 139,000 barrels, 162 percent).

Venezuela in April reduced production by 116,000 barrels to 1.956 million bpd (quota - 95,000 barrels, completed by 122 percent). Iran under the terms of the agreement can increase the average daily production by 90,000 barrels, increased oil production in April to 3.759 million barrels or 50,000 barrels from the October level.

OPEC has raised the world oil demand forecast for this year by 60,000 barrels per day versus its previous outlook. The world demand for oil will amount to 96.38 million barrels per day in 2017 versus 96.32 million barrels per day projected previously, the organization said.

Meanwhile, the oil cartel maintained its estimate of this year’s world demand growth at 1.27 million barrels per day.
vRussia participates in the oil output reduction deal, pledging to reduce production by 300,000 barrels per day starting from January 1, 2017, to the level of October 2016, or by 2.7 percent. In March, Russia reduced oil production by 202,300 barrels per day to 11.046 million barrels, thus fulfilling 67 percent of the reduction quota. Russia will reach the full quota for reduction by the end of April, Energy Minister Alexander Novak said earlier.

In March, OPEC fulfilled 106 percent of the planned quota of 1.2 million barrels.

At a meeting in Vienna on May 24-25, OPEC and Russia will hold official negotiations on the extension of the deal for another six months. To date, most cartel countries have expressed their support for the prolongation of the agreement. (TASS)