Russia and FSU – Nov / Dec 2018

Published at 10:00 2 Jan 2019 by . Last edited 11:18 22 Aug 2019.

Russian oil production rose to a record 11.45 mb/d in December, higher y/y by 0.49 mb/d. Russia has agreed to reduce supply by 0.23 mb/d by end-Q1 19 under the OPEC+ deal reached in Vienna, but it will do so gradually, cutting only 50-60 thousand b/d in January. The effect across 2019 is likely to be flat y/y growth, a view also held by the energy ministry. Most of the new 2019 project starts have been pushed back to 2020, which will also help to keep output in check.

Russian crude exports rose to 5.07 mb/d in December, higher y/y by 0.62 mb/d. January waterborne exports are set at 1.78 mb/d, lower by 85 thousand b/d m/m. Baltic exports are slated at 1.28 mb/d, down from December’s 1.37 mb/d. Primorsk loadings will be 0.77 mb/d. Over Q4 18 as a whole, Chinese buyers took all seaborne ESPO, a trend set to continue in 2019.

Kazakhstan’s output rose to a record 1.91 mb/d in November, higher y/y by 0.1 mb/d, as Tengiz (0.62 mb/d) and Kashagan (0.3 mb/d) both produced at record levels. In 2019, Kazakhstan has agreed to reduce supply by 40 thousand b/d, although cuts will be achieved through maintenance. Azerbaijan, which has committed to reducing supply by 20 thousand b/d, logged November oil output of 0.8 mb/d (+18 thousand b/d m/m; +29 thousand b/d y/y). The increases were supported by rising condensate output from the Shah Deniz complex, which offset declines at the ACG complex. As of end Q3 18, almost every platform logged sequential declines.

FSU demand grew by 0.23 mb/d y/y in November, led by Russia, to hit 5.1 mb/d. Final data show Russian oil demand rising strongly in October, by over 0.15 mb/d, led by fuel oil and gasoil amid strong industrial activity. Russian diesel demand was supported by industrial production, which grew by 3.7% y/y in October (and by 2.4% in November), although gasoline has been flat.

FSU November runs grew m/m by 0.28 mb/d to 6.82 mb/d, lower y/y by 24 thousand b/d despite planned offline CDU capacity falling markedly, by 0.65 mb/d to 0.32 mb/d (-0.13 mb/d y/y). Russian throughputs disappointed, rising m/m by 0.3 mb/d to 5.80 mb/d (+24 thousand b/d y/y), even as offline CDU capacity fell m/m by 0.46 mb/d. In Belarus, runs fell y/y by 10 thousand b/d to 0.36 mb/d, while Kazakh throughputs were flat y/y at 0.33 mb/d.

ULSD exports out of Primorsk hit their third-highest monthly total on record at 1.45 Mt (0.35 mb/d) in December (+47% y/y) and are scheduled to rise to another record of 1.48 Mt in January. Following three straight months of exports below 0.3 mb/d, the December surge came as export volumes from Lukoil and Rosneft rebounded. As for gasoil, railed exports via Tuapse were limited through year-end following late October flooding that damaged rail lines.

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