Russia to Cut June Oil Exports With Higher Refinery Runs, Lower Crude Output
Russia's Oil Export Strategy and Market Impact
Reduced Crude Oil Exports in June
MOSCOW, June 8 (Reuters) - Russia is set to reduce its crude oil exports as it plans to boost refinery runs in June amid looming fuel shortages, market sources said.
Crude loadings from its western ports of Primorsk, Ust-Luga and Novorossiysk could fall to 1.7 million barrels per day (bpd) in June from 2.5 million bpd in May, according to preliminary data from industry and trading sources.
The fall may be partly due to weakening oil output levels, the sources said.
Factors Behind Declining Oil Output
Unplanned Maintenance and Seasonal Demand
Russian oil production has fallen since the start of the year, Deputy Prime Minister Alexander Novak said on Thursday, blaming the decline on unplanned maintenance at refineries.
Completing maintenance and repair work will allow Russia's refineries to raise throughput amid seasonal fuel demand growth and shortages reported in some regions, but lower output means additional feedstock for processing will have to be diverted from exports, sources said.
They estimate Russia will seek to increase crude runs in June by 250,000–400,000 bpd, while restoring oil production will take considerable time.
Impact of Ukrainian Drone Strikes
Ukrainian drone strikes on Russian port infrastructure, pipelines and refineries since March have reduced domestic processing, and although exporters have managed to maintain shipments, Reuters sources have said production cuts were inevitable.
Russia was forced to reduce oil output in April due to such attacks on ports and refineries, as well as a halt to Russia's only remaining oil pipeline to Europe.
Recent Trends in Oil Output
Reuters sources believe crude output likely continued to decline in May, falling by around 100,000 bpd from April.
In April, Reuters sources estimated Russia’s oil output drop as the largest in six years — since the start of the COVID-19 pandemic in 2020 — at 300,000–400,000 bpd versus the average level of previous months this year and down around 500,000–600,000 bpd versus the end of last year.
Market Reactions and Domestic Supply
Domestic Delivery and Export Focus
Meanwhile, industry sources said on Wednesday there have been no spot deals for June-loading West Siberian crude for domestic delivery, as producers are focused on exports and cite a feedstock shortage this month.
Reporting and Editorial Credits
(Reporting by Reuters; editing by Jason Neely)
