Russian production was steady m/m at 11.21 mb/d in August, higher y/y by 0.3 mb/d. Output has risen by 0.24 mb/d compared to the January-May average and, in the near-term, Russia does not have any spare capacity left. In fact, Russian production is likely to ease seasonally in the winter months. Output will rise by 0.2 mb/d y/y in 2019 as new projects start and ramp up.
Russian exports totalled 4.84 mb/d in August, higher y/y by 0.19 mb/d, underpinned by rising output. However, September Urals exports are set to drop by around 5% m/m to 1.75 mb/d, Baltic Sea exports will decline by 8% m/m to 1.15 mb/d likely due to maintenance at Primorsk between 18-22 September. Ust-Luga exports are down m/m by 6%. But Siberian Light exports are set to rise by 23% m/m, with combined Siberian Light and Urals exports 11% higher m/m.
Kazakh output rose m/m (+20 thousand b/d) in July to 1.84 mb/d (+92 thousand b/d y/y), as Tengiz output recovered from an unplanned outage in June. This was able to offset lower Karachaganak production, while Kashagan output was broadly flat m/m at 0.28 mb/d.
Azeri July crude and condensate output fell m/m by 19 thousand b/d to a 2018 low of 0.77 mb/d and registered a y/y decline for the first time in six months, which came despite the start-up of the Shah Deniz Phase 2 project during the month.
FSU demand jumped by 0.2 mb/d y/y in July to 5.04 mb/d, led by strong Russian demand. Final data show Russian oil demand increased by 60 thousand b/d y/y in June, led by fuel oil, which grew by 65 thousand b/d. Agricultural demand for distillates this summer was affected by the northern hemisphere heatwave—the grain harvest is forecast to be down to 110 Mt from 135 Mt last year, with a commensurate reduction in harvesting loads set to weigh on fuel demand.
FSU July runs were higher m/m by 0.24 mb/d at 7.03 mb/d (+0.23 mb/d y/y). Russian throughputs averaged a record-high 6.00 mb/d, higher y/y by 0.26 mb/d, while Belarus runs dropped y/y by 30 thousand b/d to 0.32 mb/d. In Kazakhstan, runs were flat y/y at 0.34 mb/d. In Q3 18, we estimate FSU runs will stay in line with seasonal norms at 6.6 mb/d, with planned CDU works peaking in September at 0.91 mb/d (-0.48 mb/d y/y). Runs should be higher in Q4 18, with Russian planned works scheduled at just 0.14 mb/d, although several FCC units will be offline.
ULSD exports from the Baltic port of Primorsk are scheduled to be 6% lower m/m at 1.31 Mt (0.32 mb/d) in August due to lower supplies from Kirishi, Taif and Gazpromneft more than offsetting higher flows from Rosneft. September exports are set to decline to 1.14 Mt.