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. Last Updated: 07/27/2016

Closed Ports Give OPEC a Gift

Russia is set to offer an unexpected gift to oil markets when it announces crude exports in the last quarter of 2001 were almost 150,000 barrels per day below what was planned due to stormy weather in key ports.

Industry sources said the fall, equal to what OPEC asked Russia to cut in exports in the first quarter of 2002, would be down from a fourth-quarter schedule initially set at 36.2 million tons (2.88 million bpd) for Russian and transit oil.

The fourth-quarter figures are due in early January.

"I think we will be short by 2 million to 1.8 million tons in Q4 if the weather does not change radically," an industry source said.

Third-quarter exports came in at 37 million tons through Transneft's pipeline system and another 1.7 million tons bypassed Transneft, the state pipeline monopoly.

Russia's promised cuts to the Organization of Petroleum Exporting Countries were part of efforts by nonmembers of the cartel to reduce volumes by a combined 500,000 bpd in order to trigger OPEC cuts of 1.5 million bpd and help shore up world crude prices in the face of slow demand.

But Russian oil exports were already badly hit by bad weather in November, when main export outlets Novorossiisk and Tuapse in Russia, Odessa in Ukraine and Ventspils in Latvia stood shut for a combined 25 days.

In December, Novorossiisk, Russia's largest crude export outlet, was closed for more than 10 days, while Lithuanian terminal Butinge was closed the entire month after an oil leak.

"Currently we are running behind schedule by 1.45 million tons. Russian resources account for about 1.1 million tons, the rest are Azeri, Kazakh and Turkmen transit volumes," the source said. Russia currently produces 7 million bpd and exports 3 million bpd.

Russia sets crude output and export schedules every quarter, distributing them among its mostly private oil firms.

OPEC has told Russia it wants the country to explain the logistics of its promised first-quarter cut before the cartel meets Dec. 28 in Cairo, Egypt, to set its own final reduction.

The government commission on access to oil pipelines, headed by Deputy Prime Minister Viktor Khristenko, met on the first-quarter schedule last week, but gave no clue on its results.

Traders and industry sources said oil firms and energy officials were still in negotiations on the schedule, although the first results of the talks were emerging Friday.

A range of sources reported rumors that crude oil exports were to be set at 32.4 million tons, 1.8 million tons lower than fourth-quarter exports and fitting into the 150,000 bpd cuts from January that were offered by Russia.

However, the expected volumes of oil output were questioned amid Russian market rumors that an incredibly low figure of 88.5 million to 88.7 million tons had been set.

This would be a drop of 2.5 million tons from forecast fourth-quarter output.

Top producer LUKoil said this week Russia had to cut output to prevent an already overloaded pipeline system from breaking down.

Traders also said they were waiting for an official decision to allow them to export the volumes in January they did not lift in the fourth quarter due to storms. An industry source said a decision on unlifted volumes was expected by the end of next week.

"The cargoes are sold and it is clear they should be lifted. The problem is that there are too many of them, and some volumes could be canceled," he said.