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. Last Updated: 07/27/2016

Russia Pledges Fresh Oil Export Cuts




With world prices sagging, Russia pledged to cut crude oil exports by setting export limits for the second quarter that are 1.2 million tons below the original schedule penciled in last month.


The country's total exports for April through June will be approximately 28.7 million metric tons, said Oleg Rumyantsev, a spokesman for the Fuel and Energy Ministry, which will include 27.5 million tons for the April-June period plus 1.2 million tons of exports carried over from the previous quarter.


Russia moved to cut exports of crude oil in sympathy with a pledge from the Organization of Petroleum Exporting Countries in late March to slash crude output by about 2 million barrels per day.


The OPEC cuts helped send world oil prices to their highest levels for more than a year. However, the OPEC magic has started to wear off, with benchmark Brent crude quoted at $14.01 per barrel on Thursday, more than $2 below recent peaks but still a major improvement on the $10 or so a barrel Brent was trading at earlier this year.


Russia's Urals export oil blend was mirroring Brent and traded at $13.29 per barrel on Wednesday.


The government's move this week to cut exports may well boost oil companies' balance sheets if it would help support the price of the Urals blend, Rumyantsev said.


However, Russia's impact on market sentiments is very limited, especially because the country has an extremely poor record on restraining exports.


Even after promising earlier this year to cut supplies, Russia was forced to admit that it had failed to do so, helping to take the steam out of recent rallies in world oil prices.


Exports of crude and petroleum products from Russia and its ex-Soviet neighbors rose 300,000 barrels a day in April to 4 million bpd, London's Energy Market Consultants, or EMC, reported Thursday, according to Reuters.


Meanwhile, St. Petersburg suffered major gasoline shortages earlier this month that many industry figures blamed on exporters seeking to take advantage of the huge difference between world prices and low domestic gasoline prices.


Russian industry analysts said they were highly skeptical over the latest announced export cut.


"Actual export cuts won't happen - as there will always be good reasons to increase exports back up," said Vladimir Nosov, an oil analyst with Fleming UCB investment bank.


Indeed, Rumyantsev cautioned, when announcing the export cuts, that the peculiarities in exporting Russian crude could make the promised cuts difficult to follow.


"Russian crude export has seasonal and particular factors," he said.


Weather conditions can have a tremendous impact on Russian exports as rough weather at sea can prevent tankers loading cargoes at the Black Sea and Baltic ports.


First-quarter crude exports were therefore just 26.8 million tons - 3.7 million tons below contracted levels - due to poor weather during February at Novorossiisk, Russia's main Black Sea oil port, the Energy Intelligence Group reported.


To allow for fulfillment of these contracts, the Fuel and Energy Ministry had penciled in exports of 28.7 million tons for the second quarter, including 2.5 million tons of exports carried over from the first quarter.


With carried-over volumes at some 1.2 million tons above its estimates,


the Fuel and Energy Ministry decided to slash the original 28.7 million


tons schedule for the second quarter down to 27.5 million tons, effectively cutting second-quarter exports to


allow for deferred first-quarter exports.