Russia increased oil exports by sea in March

Kommersant reports that in March, Russian oil companies significantly increased sea exports to 3.8 million barrels per day due to problems with refinery utilization. This is the highest level since May 2023. The increase in oil exports is due to the redirection of flows from refineries damaged by drones. In April, the Russian Federation will reduce oil production and exports in compliance with its obligations to OPEC+.
In March 2024, marine exports of Russian oil increased by 5% compared to the same period last year, reaching almost 3.8 million barrels per day (b/d), according to Kpler data (available to Kommersant). This is a record figure since May 2023, when supplies abroad exceeded 3.9 million bpd. In January and February, the Russian Federation exported 3.5 million bpd and 3.3 million bpd by tankers, respectively.

Due to accidents at refinery installations after Ukrainian drone strikes, Russia is compelled to significantly increase oil exports. The Energy Ministry anticipates that the damaged plants will be operational by June. The Nizhny Novgorod, Syzran, and Kuibyshev oil refineries were among those affected by the attacks in March. Furthermore, in late March, the Astrakhan Oil Refinery experienced a technological breakdown that took several days to resolve. Additionally, in early April, the Orsky Oil Refinery ceased operations due to flooding, and supplies are now being sourced from accumulated reserves. According to Kommersant's sources, several oil-producing enterprises have already been compelled to reduce production due to accidents.

Deputy Prime Minister Alexander Novak reported that the Russian Federation will be required to reduce oil production (excluding condensate) and exports in the second quarter of 2024 as part of an agreement with OPEC+. As a result, oil production is expected to decrease to 9 million bpd in June. The Russian Federation currently produces approximately 1.4 million bpd of condensate.
In March, the Russian government pledged to reduce oil and petroleum production and exports by 471 thousand bpd in Q2 as a precautionary measure to maintain oil market stability and balance, in line with OPEC+ countries. In April, the Russian Federation plans to decrease production by 350,000 b/d and exports by 121,000 b/d. In May, the reduction will be 400,000 b/d and 71,000 b/d for production and exports, respectively. In June, production will only be reduced by 471,000 bpd. OPEC estimates that oil and condensate production in the Russian Federation will decrease by 1.6% to 10.75 million bpd in 2024.

Amidst OPEC+ decisions and geopolitical tensions in the Middle East, oil prices reached $90 per barrel of Brent last week. With prices on the rise, production cuts should be less burdensome for oil companies.
Last year, the Russian Federation chose to decrease oil exports instead of production. They directed additional volumes to refining to increase fuel supplies to the domestic market. As a result, oil production at the end of 2023 decreased by only 1%, to 530 million tons.

Victor Katona from Kpler is certain that Russian oil companies will be compelled to decrease production due to their obligations under the OPEC+ deal, given the difficulty of increasing oil refining until at least June and the seasonal repairs of oil refineries. The Ministry of Energy has already instructed oil companies to reduce production. The only question is whether production will be reduced by the entire promised 471 thousand bpd or less, the analyst notes. Mr. Katona suggests that due to a 350 thousand b/d decrease in oil refining since the beginning of the year, the production cut will likely be around 350-400 thousand b/d, slightly below the required amount. He also predicts that seaborne oil exports will gradually decrease to the usual 3.5 million bpd as a result of the production cut. This level of shipments has been consistent in recent months.