Russia increases oil production and exports amid sanctions

Oil production Russia’s output in May amounted to 10.2 million bpd, up from 10 million bpd in April but still down 2.5% from May 2021 output.

Russian Deputy Prime Minister Alexander Novak said that oil production in 2022 could be reduced to 480-500 million tons, while output in 2021 is 524 million tons. However, according to the official, the government expects output to gradually recover to about 1 million barrels per day this June.

According to Vedomosti news, from January to May 2022, Russian oil producers increased production by about 3.5% year-on-year to 219.9 million tons. The leading Russian oil companies in terms of output during this period were Surgutneftegaz (up 13%), Lukoil (up 10%) and NNK (up 9%).

Russian oil exports increased by nearly 13% to 102.7 million tons, statistics show. Russian oil exports increased despite foreign oil traders hesitant to buy Russian crude due to the risk of secondary sanctions.

The US and UK have imposed sanctions on Russian oil, while the EU agreed to a partial embargo this past week. Under the bloc’s sixth round of sanctions, the import of Russian oil to the EU by sea will be banned for the next six months.

However, restrictions on imports through the Druzhba pipeline were postponed. The Czech Republic, Hungary and Bulgaria are temporarily exempt from the embargo on Russian oil supplies.

Analysts say that, to attract potential oil buyers, Russia has reduced oil prices, helping its fuel continue to be attractive despite sanctions. For example, Russia’s oil exports to India increased nearly 25 times in May compared to May last year.

Russian oil exports to China also grew, up 4% year-on-year to 6.55 million tons. Russia is second only to Saudi Arabia as China’s main source of oil.

Experts predict that Russian manufacturers will continue to reorient export flows to Asian markets in the coming months, which will ensure a further recovery in production.

According to a forecast from Refinitiv, Russia’s oil exports to India could rise to a record 900,000 bpd, while additional oil deliveries to the Chinese market could reach 400,000 bpd as Russian demand increases China recovers from the blockade.

“If the consumer Europe refusing to gradually import Urals sea shipments, we think all the reduced export volume will be redirected to Asia within a month and a half to two months” – Alfa senior analyst Nikita Blokhin -Bank told Vedomosti.

He also said that redirecting export flows to Asian markets would help stabilize Russian production at 10.3 million bpd.