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. Last Updated: 07/27/2016

Oil Exports Fall Despite Record Output

Oil exports, including transit volumes from neighboring Kazakhstan and Azerbaijan, fell in October by 140,000 barrels per day after the country's main ports were hit by storms.

But as oil output hit another post-Soviet high, traders questioned whether Russian majors would curb the unprecedented growth in November and December, when the weather is traditionally even worse, as a domestic oil glut is already looming.

According to data supplied by an Energy Ministry source, crude oil production, booming for the fourth consecutive year in Russia, rose again in October to 33.628 million metric tons, or 7.95 million bpd, from 7.84 million bpd in September.

The world's second-largest oil exporter supplied 3.2 million bpd of its own and transit crude to international markets in October, down from 3.34 million bpd in September.

Transit volumes, mainly from Kazakhstan and Azerbaijan, rose in October to 434,000 bpd from 370,000 bpd in September.

Russian-only crude exports via state pipeline monopoly Transneft stood at 2.65 million bpd, down from 2.87 million bpd in September.

Deliveries bypassing Transneft, mostly by rail and small ports, rose slightly in October to 122,000 bpd from 105,000 bpd in September, but traders estimate volumes leaving the country by rail and small ports at 600,000 bpd and put real volumes of crude oil exported from and via Russia at more than 4 million bpd.

Market players said they believed domestic oil majors could rein in ambitious output growth as bad weather starts to eat into seaborne exports and rivers freeze over.

"We have already seen the first signs of self-restriction in October. The initial schedule saw the output to be 500,000 tons [115,000 bpd] higher than the final figure in October," an Energy Ministry source said. In the first quarter of 2002, domestic oil prices almost halved compared with the third quarter of 2001 as a result of a massive domestic glut due to severe storms in December 2001.

Crude supplies to Russian refineries rose nearly 14 percent to 17.3 million tons in October year on year.

"I think this year the glut is also unavoidable, because it is not easy to shut down production in western Siberia once you have reached record volumes. I believe that self-restrictions will be minimal," a senior Russian trader said.

A Western trader said the Latvian port of Ventspils could help offset the glut if Transneft decided to change its policy and resume large shipments to the neighboring state.

"It is really amazing that Russian oil majors are not yet protesting against Transneft's policies, despite losing huge export possibilities when an oil glut is already knocking at their doors," he said.

Ventspils, once the biggest outlet for Russian crude on its way to northern Europe has stood almost dry over the last few months as market players say Transneft is flexing its muscles and looking to buy into the terminal.

"The situation is unlikely to change in November when the schedule sees Ventspils loading even smaller volumes -- only two cargoes. But let's see what happens in December if other ports are hit by severe storms this month," the Western trader said.

 The government may raise the oil export tariff to $29.8 per metric ton from December from the current $26.2 per ton because of oil price growth over the last two months, a government official said Monday.

The official said the government commission for protective measures in foreign trade, a panel that drafts resolutions on crude oil export tariffs every two months, would discuss the issue Tuesday.