Russia, a key player in the oil industry, has recently announced plans to reduce its oil exports from western ports by approximately 100,000 to 200,000 barrels per day in August. This move is seen as a clear indication of Russia’s commitment to its promise of new supply cuts, a decision made in collaboration with OPEC leader, Saudi Arabia.
The OPEC+ alliance, which includes Russia and other major oil producers, has been implementing supply cuts since November to bolster oil prices. Earlier this month, Moscow vowed to decrease exports by 500,000 barrels per day in August, while Saudi Arabia extended its 1 million barrels per day output cuts.
The specifics of Russia’s cuts were initially unclear, leading to difficulties in monitoring. However, according to trading sources and data from Refinitiv Eikon, the planned cuts for August will intensify the export reductions that have already reached 500,000 barrels per day between May and July.
The oil loadings from western ports such as Primorsk and Ust-Luga in the Baltic Sea and Novorossiisk in the Black Sea are projected to drop to 1.9 million barrels per day this month, down from 2.3 million in June and 2.4 million in May.
Russia also exports oil and products via the Pacific and a direct pipeline to China, in addition to its European ports. The export plans for these eastern routes have not been disclosed yet.
In a recent meeting with top managers of oil companies, Russian energy authorities requested more efforts to ensure lower exports in August. However, the decision to cut oil production in August will be made by the Russian companies themselves, according to Russian Deputy Prime Minister Alexander Novak.
Russia’s total crude and product exports are estimated to be up to 7 million barrels per day. However, the data has been kept confidential due to the country’s ongoing actions in Ukraine.
Before Russia’s announcement to cut overseas supplies, OPEC+ was only managing oil production, not exports. The suggestion to reduce exports as well as output was first made by Igor Sechin, the influential head of Russia’s largest oil producer, Rosneft.
The challenge of additional oil export cuts in August is further complicated by the expected 40% increase in Russia’s offline primary oil refining capacity from July. To achieve the planned reduction in oil exports, companies may delay some planned works to the autumn months to boost domestic oil consumption, or they may decide to cut oil production.
