Russia and FSU – Oct / Nov 2018

Published at 09:21 3 Dec 2018 by . Last edited 11:14 3 Dec 2018.

Russian oil production fell m/m by 50 thousand b/d to 11.37 mb/d in November, but was still up y/y by 0.4 mb/d. Production is likely to remain steady at around 10.4 mb/d through most of H1 19, with cuts under an OPEC+ deal, if one is reached, unlikely to be much more than 0.15 mb/d.

Russian crude exports rose fell m/m, by 0.13 mb/d to 5.01 mb/d in November (+0.31 mb/d y/y) as a result of refineries returning from maintenance in the second half of the month. Russian seaborne crude exports are scheduled at 1.89 mb/d in December, lower m/m by 4%. The drop will be driven by lower loadings from Novorossiysk and Ust-Luga. This has supported Urals differentials in both regions, moving to a premium to Dated Brent.

Kazakhstan’s output fell to 1.76 mb/d in October (+65 thousand b/d y/y) due to seasonal maintenance at Tengiz, where output fell by 20% (0.12 mb/d). Interestingly, this marks the second turnaround in the past few months, as output fell to 0.45 mb/d in August too.

Azerbaijan’s October crude and condensate output reversed into y/y declines for the first time in three months at 0.78 mb/d, lower m/m by 13 thousand b/d. Supply may have slipped again in November, with BTC loadings suggesting platforms at the ACG complex went offline. BTC loadings recover in December.

FSU demand remained robust in October, higher y/y by 0.22 mb/d at 4.94 mb/d, led by Russia, although September demand growth was revised slightly lower to 0.12 mb/d. Final data show Russian oil demand increased by 0.10 mb/d in September, led by fuel oil and gasoil. Diesel demand from the Russian agriculture sector has been hit by reduced crop yields this year due to unfavourable weather conditions, while demand from industry has been solid.

FSU October runs were flat m/m at 6.73 mb/d (+0.47 mb/d y/y) as planned offline CDU capacity rose by 0.24 mb/d m/m to 0.91 mb/d (-0.41 mb/d y/y). Russian throughputs fell m/m by 0.20 mb/d to 5.51 mb/d, driven by a 0.14 mb/d increase in offline CDU capacity, but runs were higher y/y by 0.12 mb/d. In Belarus, runs increased y/y by 57 thousand b/d to 0.33 mb/d.

November ULSD exports out of Primorsk were scheduled to be flat m/m at just under 1.06 Mt in absolute terms, while December exports are set at 33% higher m/m at 1.46 Mt. Russian exports of diesel and gasoline may be capped in the coming months by a government–industry deal, under which refiners must boost domestic diesel and gasoline supplies by 3% y/y from November to March 2019 to forestall potential domestic price rises.

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