Russia’s Aug oil export cut will not require output drop, source says

Russia’s latest pledge to reduce oil exports will not require a similar cut in production, a government source told Reuters on Friday, as the market hunts for signals from Moscow on oil supply.

At least three sources at Russian oil companies also said that there have been no orders to reduce output additionally.

On Monday, Deputy Prime Minister Alexander Novak said via his press service that Russia would cut oil exports by 500,000 barrels per day (bpd) in August amid weak global oil prices.

Later, his spokesperson said “additional 500”, when asked by journalists if oil production would also decline next month.

However, the government source said that Russia will not need to reduce output additionally.

“Russia will most likely not have to cut production in August due to increased consumption in the country’s domestic market. As we know, prices are rising there and there is not enough fuel,” said the source, who declined to provide his name as he was not authorised to speak to media.

The Energy Ministry and leading oil companies did not reply to requests for immediate comment.

Russia is the world’s second largest oil exporter after Saudi Arabia, which also announced an August output cut of one million bpd on Monday, adding that the cut could be extended.

Moscow’s and Riyadh’s cuts amount to 1.5% of global supply and bring the total pledged by OPEC+ to 5.16 million bpd.

The state coffers of Russia and Saudi Arabia are heavily dependent on revenue from oil sales.

The price of Urals oil, Russia’s flagship grade, has only recently exceeded the breakeven level for a deficit-free budget if calculated in roubles, as the Russian currency weakened against the U.S. dollar.

According to Refinitiv Eikon data, Russia’s seaborne oil exports from Primorsk, Ust-Luga and Novorossiisk will fall to 1.9 million bpd in July from 2.3 million bpd in June as domestic refineries increase runs.

Russian refineries cut runs in the spring allowing state exports to reach a 4-year high in May.
Source: Reuters (Reporting by Olesya Astakhova and Vladimir Soldatkin; editing by Jason Neely)