Idle Refineries Could Complicate Russia’s Oil Export Cuts
Russia will have more refining capacity offline this month than initially planned, Reuters has estimated, which could mean that Moscow may not deliver the 500,000-bpd crude oil export cut it has promised for August.
Some big Russian refineries have extended their respective periods of maintenance into July, which resulted in higher-than-anticipated idle refining capacity this month, according to industry sources and estimates from Reuters.
Early last week, Russia’s Deputy Prime Minister Alexander Novak said that Russia would cut its crude oil exports by 500,000 barrels per day (bpd) in August in a bid to ensure a balanced market.
“As part of the efforts to ensure a balanced market, Russia will voluntarily reduce its oil supply in August by 500,000 barrels per day by cutting its exports to global markets by that quantity,” Novak said in a brief statement, which followed a Saudi Arabia announcement that the Kingdom would extend its unilateral 1 million bpd production cut into August.
The top oil official in Russia didn’t give any figures as to the volume of the Russian production and exports for August, nor the baseline from which the cut would be made.
The August cut in exports would mean an additional cut in oil production by 500,000 bpd in August, Novak’s office told Russian daily Vedomosti.
However, estimates about higher-than-expected offline refining capacity this month could mean that Russian crude oil exports could be incentivized, and this situation could extend into August, the month for which Russia has promised to reduce exports by 500,000 bpd.
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Analysts doubt that Russia would fully deliver on those pledged cuts, considering the high and resilient crude exports so far this year.
May and June saw more refining capacity offline than in July, due to maintenance, but Russia’s crude oil shipments in those months reached multi-month highs and were much higher than in February, the baseline for its 500,000-bpd production cut.
