Russian oil production increased +1.5% m/m in March, gas production surged by 12% y/y

RUSSIA ENERGY / FINANCE - In Brief 05 Apr 2021 by Marcel Salikhov

---

CDU TEK published its preliminary production data for March. Oil & condensate production was restored by 0.15 mbd, to 10.25 mbd, after a decline in February 2021. Rosneft's results explain almost 2/3 of the monthly increase, but other majors have also shown positive dynamics. Growing external demand was a significant force driving oil production in March. Export of crude increased by 0.16 mbd (+3.8% m/m). The easing of OPEC+ terms allows Russian companies to increase output further in May 2021 by 60-70 thousand barrels per day. Chart 1. Oil production and crude exports, January 2018 - March 2021 Source: IEF based on CDU TEKWe also note a strong growth in domestic demand for gasoline in February-March. More robust domestic demand is probably one reason for gasoline price increase which is a major headache for the Government. We feared that the February decline might result from technical difficulties bringing back wells that were shut off due to OPEC+. But March results are somewhat optimistic. On an annual basis, oil production in March is almost 1 mbd (-9.3% y/y), lower than in March 2020. Detailed company-level data, which will be published later in April, will help to get more decisive evidence. Chart 2. Gas production, 2018-2021Source: IEF based on CDU TEKGas production surged surprisingly stronger by +12% y/y in March vs +2.7 y/y in February. We note that flow data to EU for March are relatively muted (-0.7% y/y). We believe that more important factors are connected to increased pipeline exports to China and Turkey and more robust domestic demand. The effective price of Russian gas supplies to China probably fell to $3.0-3.5/MMBtu to lagged effect of the price for...