Russia Set To Reduce Oil Output By 10%

Advertisment

Last Friday, industry sources said that Russia is reducing its oil output by as much as 10 percent for several days amid the disruptions because of the contamination of crude in a major pipeline to Europe and at a key port for exports.

Two industry sources disclosed that oil producers in Russia received a request from Transneft, a state-run pipeline monopoly, to reduce its oil output by 900,000 tonnes, or approximately 6.6 million barrels until the 7th of May.

According to the calculations of Reuters, that represents over 1 million barrels per day (bpd) over the next five days or approximately 10 percent of the output from the second largest crude exporter in the world.

Transneft refused to answer comments regarding the matter.

A Russian oil buyer with an oil major stated: “This just shows this disruption is extremely serious. Russia has had its major export pipeline and port either shut or not functioning properly in the last 10 days, so output cuts are unavoidable.”

Last week, Russia halted the oil flows in the Druzhba pipeline to Germany and Eastern Europe due to contaminated crude, contributing to an increase in global oil prices to a six-month high and leaving the refiners in Europe scrambling to look for supplies. The oil sent to the Baltic port of Ust-Luga was also affected.

Transneft has pledged to resume the normal flows of oil to Ust-Luga by the 7th of May, however, it said that it may take longer to resume normal operations along Druzhba.

Belarus has said that it could take months to repair the pipeline issue, while the refiners across Europe have been cutting runs and requesting governments to allow them to use strategic oil reserves.

At least 5 million tonnes of oil, or approximately 36.7 million barrels, have been contaminated by organic chloride, a compound that is used to boost oil extraction but which must be removed before the oil is sent to the clients as it can damage refining equipment.

Transneft said that the contamination occurred in the Volga region of Samara and blamed unnamed “fraudsters”. Vladimir Putin, the President of Russia, said that Transneft lacked a proper mechanism to prevent the contamination.