Yemisi Izuora/Agency Report
Russia pumped oil in September at levels not seen since the fall of the Soviet Union thus adding to the global glut that is keeping crude prices lower.
Russia’s oil output in September rose to an average of 10.74 million barrels a day, government data showed.
Oil production increased 0.4 percent from August, Dow Jones report says.
The record-high Russian output adds to an already oversupplied global oil market. It is also the latest indication that Russia, one of world’s biggest oil producers along with Saudi Arabia and the U.S., isn’t prepared to join the Organization of the Petroleum Exporting Countries in trimming production to prop up prices. OPEC has indicated that it will only consider a cut if other big suppliers, like Russia, join it and several OPEC members have tried to woo the country.
The fall in oil prices, which are down around 50% since last year, has battered the Russian economy, where oil and natural gas sales account for more than two-thirds of export revenue.
The oil price slump, coupled with Western sanctions and a weakening currency, has already pushed the country into a recession which the World Bank expects to wipe 3.8% off the Russian economy this year.
In September, Russian Deputy Prime Minister Arkady Dvorkovich ruled out any cuts, saying that output may only decline if prices remain low for a sustained period. Mr. Dvorkovich said even then, production wouldn’t fall by much.
“Russia has a different approach to the major OPEC countries—it strives to produce as much oil as it can all of the time and then deals with the consequences of the price afterwards,” said Christopher Weafer, founding partner of Moscow-based consultancy Macro-Advisory. “There is no possibility of Russia cooperating with OPEC to manage supply and there is zero possibility of Russia ever joining OPEC.”
Last November, OPEC, the 12-nation oil cartel, embarked on a policy of defending market share by keeping its output targets unchanged despite the global glut of crude. That has battered prices, leaving countries dependent on oil revenue, from Venezuela to Nigeria, struggling to shore up their public finances.
Last Friday, Anton Siluanov, Russia’s finance minister, said oil prices won’t recover as quickly as after the 2008-2009 financial crisis. His ministry sees oil averaging at $50 per barrel in 2016 and $52 in 2017.
Moscow has indicated that the country’s budget will be based on the assumption that oil prices stay close to $50 a barrel. On Friday, Brent crude, the global oil price benchmark, was trading at $48.70 a barrel.
The government has said because of the geology and harsh climate, Russian companies can’t adjust oil output as easily as in other producing nations.
Also, the depreciation of the ruble makes it relatively cheaper to produce oil in Russia, helping to preserve oil-company margins.
“The low oil prices have not had any impact on the production plans” in Russia, said Pavel Kushnir, a Moscow-based oil and gas analyst at Deutsche Bank.
The bank estimates that Russian output this year will average around 10.6 million barrels of crude a day. That is above the 10.58 million barrels a day the country produced last year, a level of output not seen since the end of the Soviet Union.