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Russian oil output eased off by 40 thousand b/d m/m to 11.30 mb/d in March (+0.33 mb/d y/y). This is 0.12 mb/d below the October 2018 baseline and lags the 0.23 mb/d agreement made as part of the OPEC+ agreement. We expect output to decline again in April.
Russian crude exports totalled 5 mb/d in March, flat m/m but higher y/y by 0.38 mb/d as refinery works began. Exports will rise further in April, with flows via ports on the Baltic Sea (1.58 mb/d, higher m/m by 8%) and Black Sea (0.6 mb/d, slightly lower m/m) set to rise by 6% m/m to 2.18 mb/d. Peak refinery works in Q2 19 will keep exports elevated.
Kazakhstan’s February output was largely unchanged m/m at 1.90 mb/d, higher y/y by 50 thousand b/d. March output is expected to be unaffected by a fire at the Kalamkas oil field. In April and May, output will fall as Kashagan, which recently hit phase one capacity of around 0.33 mb/d, will go offline for 45 days from 14 April. Later this year, there will be turnarounds at Tengiz (42 days from 1 August) and Karachaganak (28 days from 15 September). Meanwhile, Azerbaijan’s February crude and condensate output rose by 25 thousand b/d y/y to 0.81 mb/d despite a pledge to cut supply by 20 thousand b/d. Growth came from condensate, supply of which rose to 84 thousand b/d as BP’s Shah Deniz field continued to ramp up.
FSU demand rose by 49 thousand b/d y/y to 4.6 mb/d in February, with growth slowing amid mild winter weather. We expect Russian diesel demand to come in stronger, led by industrial production, but our Q1 19 growth forecast (+11 thousand b/d to 0.67 mb/d) has downside risks following recent weak economic data. Support for diesel should also come from agriculture, with the Russian government forecasting a 5% y/y increase in the total grain harvest for 2019 to 116 Mt, up from 113 Mt in 2018. Anecdotally, infrastructure spending is also picking up.
FSU February runs fell m/m by 0.1 mb/d to 6.8 mb/d (+0.1 mb/d y/y). Offline CDU capacity fell y/y by 49 thousand b/d to 0.34 mb/d. Russian runs fell m/m by 46 thousand b/d to 5.86 mb/d (+0.14 mb/d y/y). Notable planned works were undertaken at the Tuapse refinery’s 0.24 mb/d CDU. In Belarus, runs fell y/y by 33 thousand b/d to 0.32 mb/d, while Kazakh runs fell y/y by 5 thousand b/d to 0.31 mb/d.
ULSD exports from Primorsk in April are scheduled to be 1.17 Mt (0.29 mb/d), 20% lower m/m but flat y/y. The drop is due to the start of heavy refinery works in Russia, including six weeks of hydrotreater maintenance at the Kirishi refinery from late March to mid-May.