Falling Russian Crude Output Lifts Brent Oil Prices

By Tsvetana Paraskova- May 27, 2019, 2:00 PM CDT

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Russian oil production continues to trend lower in May as exports via the Druzhba oil pipeline have been restricted due to a contamination issue, helping Russia to finally fall in line with the OPEC+ production cuts.

Russia’s oil production averaged 11.126 million bpd between May 1 and 26, two industry sources told Reuterson Monday. This compares to average production of 11.147 million bpd between May 1 and 21, according to the sources.

This month through May 26, exports of Russian oil via the pipelines of operator Transneft, including the Druzhba pipeline, were down 6 percent compared to April, the sources told Reuters.

Between May 1 and 16, Russia’s oil production is said to have averaged 11.156 million bpd, which means that Moscow was finally below its quota under the production cut deal.

As part of the OPEC+ production cuts between January and June, Russia is taking the lion’s share of the non-OPEC cuts and pledged to reduce production by 230,000 bpd from October’s post-Soviet record level of 11.421 million bpd, to 11.191 million bpd.

Analysts and traders say the progress in restarting supply is very slow while costs could be very high, despite Russia’s assurances that clean oil will resume flowing through the pipeline westward to Europe in the second half of May.

Last week, Russian oil flow via the Druzhba pipeline reached Slovakia, while Czech pipeline operator MERO told Reuters on Monday that oil from Russiarestartedat noon local time today, with the crude being within-standards quality because it had already been in the pipeline before shipments were suspended.

The now month-long suspension of Russian oil supply to several European countries comes as global supply outages mount with Venezuela and Iran, and with increasing supply disruption risks in Libya and the Middle East.

By Tsvetana Paraskova for Oilprice.com