Russia increased oil and gas condensate production in April to 46.45 million tons, equivalent to 11.35 million barrels per day (bpd), up 0.53% from March at 11.29 million bpd, although this May will cut production. Reuters uses a ratio of 1 metric ton equal to 7.33 barrels.
The Russian news agency, Interfax, reported oil production data based on information from the Russian Ministry of Energy. From the report, you could see that since January 2019, this month was the highest monthly average output or production, when Russian oil production penetrated 11.38 million bpd.
Last month, OPEC along with Russia and other allied oil producers (OPEC+) agreed to cut global oil production to around 10 million bpd or equal to 10% of global supply. It is expected that oil-producing countries outside OPEC also cut around 5 million bpd.
This production cut will be carried out from May and June to deal with the collapse of the world economy due to the impact of a coronavirus or Covid-19 which has become a pandemic. This policy expected could deal with the oil price crisis nowadays.
Global Production Cutting to Combat the Decline in Oil Prices
An unprecedented 15 million bpd cut in oil production. However, that amount is estimated to still not be able to convert the drop in oil demand due to Covid-19. US President also has threatened OPEC+ if it does not fix the problem of oversupply of the oil market.
West Texas Intermediate (WTI) price for June 2020 delivery traded at US $19.69/barrel or rose 4.51% in this Thursday trading. But on a year to date basis, WTI price has dropped 66%. While Brent oil for Asian and European benchmarks at the level of US $26.44/barrel, or minus 58% year-to-date.
Norway, Canada, and Brazil will also contribute to this production cut, bringing the total reduction in oil production to 20 million bpd, or 20% of global supply, although Covid-19 makes the demand for this energy commodity collapse by 30% and triggering the price to fall.
From their baseline production of 11 million bpd, Russia is expected to cut oil production by 2.5 million bpd this May and June. This figure excludes the production of very light gas condensate or crude oil. The Russian Ministry of Energy did not disclose the production of gas condensate separately.
Tatneft Oil Company Also Reduce Oil Production
In addition, on Saturday (05/02/2020), a medium-sized oil company in Russia, Tatneft also stated that they would produce 1.994 million tons of oil in April, down from last March which was 2.442 million tons. This production reduction reached around 90,000 bpd or 16% from March.
It's just that Tatneft's management did not say the reason for reducing output last month. However, according to sources and data processed from Reuters last week, it was discovered that Tatneft's move to cut output was because storage capacity was full, while demand in Europe was also weak.
The oil company, which operates in Tatarstan, central Russia, was previously a mainstay for the Red Bear Country to produce oil. Even in the 1970s, Tatneft became the country's foundation by producing 2 million bpd, helping the Soviet Union fund an arms race with the US at the time.
Russia has pledged to fulfill its full commitment to cut production to reduce global supplies so prices rise. Thus, oil production is predicted to fall to between 480-500 million tons this year. Equal to 9.6-10 million bpd. Since 2008, it’s the first declining annual rate.
Interfax also reported that Russia's natural gas production in April was down 14.3% from the same month a year earlier, reached 55.14 billion cubic meters. On the other hand, in January-April 2020 period, Russian oil exports increased to 83.79 million tons or equal to 2.2% year on year.
