Russia’s threatened oil-output cut still hasn’t appeared in the one place it really matters — exports.
The Kremlin pledged to reduce crude production by 500,000 barrels a day between March and December in retaliation for Western trade restrictions and a price cap imposed by the Group of Seven nations.
As more official data is classified as “sensitive,” it becomes harder to know whether the cut has really been made and, if so, to what extent. The figures that do emerge are often contradictory.
Russia’s Energy Ministry said output curbs almost reached the targeted level in April. That’s all well and good, but they would say that, wouldn’t they? A month earlier, they had said the reduction in March was 40% bigger than promised.
Russia needs oil traders to believe that the cutback is real if it’s to have the desired impact, creating a sense of shortage and boosting prices.
Moscow’s partners in OPEC+ need to believe it, too. Several of them have announced their own output curbs in an attempt to bolster oil markets in the face of economic headwinds. Backsliding by one of the group’s biggest producers won’t go down well.
Official production figures have a long and inglorious history of being massaged to show what governments want them to. OPEC began publishing secondary-source estimates of members’ output in the 1990s when fanciful official data started to undermine the group’s credibility.
If the official numbers are unreliable, we have to fall back on what we can see. In this case, the amount of oil leaving the country.
Fortunately, this is also what really matters to international markets. If Russia lowers its domestic consumption by the same amount it reduces production, the net effect on the world is zero.
Exports of crude from Russia show no sign of falling. In fact, they’re doing the opposite. The Kremlin has suggested seaborne shipments have been boosted by volumes no longer piped directly to Europe. That’s true, but Moscow’s own data show that hike took place in January and February, before the output cut came into effect.
Exports of refined products, particularly diesel, are coming down. But, for now, that appears to reflect normal seasonal maintenance at Russian refineries.
I’m sure Moscow’s OPEC+ partners will give it the benefit of the doubt when the group meets next month. None of them wants a price war like the one they briefly embarked on in 2020. But they may struggle to support oil prices in the face of mounting economic fears without clear evidence that Russia’s cuts are real.
Natural gas prices surged in western Canada on Monday as wildfires forced drillers in the nation’s largest producing region to shutter supplies. Blazes in Alberta may have cut energy output by the equivalent of 500,000 barrels a day, Rystad Energy said Tuesday. Tens of thousands of people have been evacuated, and there were still 88 active fires as of Tuesday afternoon, though prices dropped back. The region has been dry, with large areas of British Columbia, Alberta and Saskatchewan gripped by drought through March. If El Nino kicks in across the Pacific, as most forecasters believe, western Canada could be in for a long, parched summer.
Today’s top stories
Liquefied natural gas stored on ships has risen to a record for this time of year, signaling wavering demand despite lower prices. Meanwhile, RWE AG is preparing to pull out of a controversial LNG project off Germany amid political rows and delays to key decisions.
Asian and European oil buyers are having to pay hefty prices for lower-quality, dirtier crudes as sanctions on Russia and OPEC+ cuts reduce their availability. In a rare move, Saudi Aramco will sell its Arab Extra Light variety for less than Arab Light to Asia next month.
Allkem Ltd. will combine with fellow lithium producer Livent Corp. to create a company with a valuation of $10.6 billion, the latest deal in a sector that’s benefiting from surging electric-vehicle demand.
Germany’s EON SE warned that Europe may not have seen the end of energy-market turmoil and the situation could still get worse. “The crisis is not over yet,” Chief Financial Officer Marc Spieker said as the utility released its first-quarter earnings report.
A group of nonprofits is pushing Barclays Plc to retract a research note they claim amounts to a “whitewash” of the environmental and social impact of an African oil pipeline being developed by firms including TotalEnergies SE.
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