Russian oil production rose marginally m/m to 11.15 mb/d in June (+80 thousand b/d y/y), still below the December 2018 OPEC+ target of 11.19 mb/d, supported by the partial restart of the Druzhba pipeline. A full restart may take 12 months according to latest estimates, underpinning Russia’s decision to extend the OPEC+ cuts by nine months. Output is unlikely to rise much beyond 11.20 mb/d until September and will then rise gradually as more pipe resumes service.
Russian crude exports rose m/m by 0.1 mb/d in June to 4.87 mb/d despite refineries returning from works, as both legs of the Druzhba pipeline restarted partially. The preliminary July programme pegs Ust-Luga exports at just 0.24 mb/d vs 0.68 mb/d in June, with Q3 19 exports scheduled at less than a third of usual volumes. July loadings from Primorsk are set at 1.13 mb/d vs 1.04 mb/d in June as maintenance at the Kirishi refinery was pushed back a month, but that is still not enough to offset the losses from Ust Luga. Q3 19 Primorsk exports are set to rise by 21% q/q. Novorossiysk exports are scheduled at 0.76 mb/d compared to 0.70 mb/d in June.
Kazakhstan’s May output gained m/m by 40 thousand b/d to 1.64 mb/d as maintenance ended at Kashagan. The offshore field has since hit a record high, breaching 0.4 mb/d following some post-maintenance debottlenecking. As a result, we have revised our 2019 Kazakhstan forecast higher by 40 thousand b/d to 1.81 mb/d. Azerbaijan’s May crude and condensate output recovered m/m by 90 thousand b/d to 0.78 mb/d as maintenance at the Central Azeri platform ended. However, it remained lower y/y for the second consecutive month (-25 thousand b/d).
FSU demand rose by 40 thousand b/d y/y to 4.47 mb/d in May, driven by strong Russian numbers. Final Russian data show demand higher y/y by 0.16 mb/d in April, led by fuel oil. Jet demand rose by 10 thousand b/d y/y.
FSU runs fell m/m by 0.1 mb/d to 6.2 mb/d in May (-0.51 mb/d y/y), the lowest reading since April 2013. The slowdown in runs was due to a 0.33 mb/d m/m increase in CDU works to 1.3 mb/d (+0.62 mb/d y/y) amid a rise in planned maintenance, the Urals contamination issue and the bankruptcy of New Stream’s 0.18 mb/d Antipinsky refinery. Russian runs were 0.5 mb/d lower y/y at just 5.18 mb/d. We estimate Q3 19 FSU runs will average 6.7 mb/d, a y/y drop of 0.18 mb/d.
ULSD loadings from Russia’s Baltic port of Primorsk will recover further to 1.05 Mt in July but loadings are still lower y/y even though production is likely to rise again with the anticipated restart of the Antipinsky refinery, the delay to work at the Kirishi refinery, and the start of a second CDU at the Taneko refinery this month (July).