Summary: On the day of Putin's speech, the Russian Deputy Prime Minister said on Wednesday that Russia had fulfilled its pledge to cut production this month and will continue to increase the export of crude oil by sea. Media reports indicate that as of last Friday, Russia's seaborne export volume hit a new high since data tracking began early last year. As of last week, international crude oil saw its longest continuous drop since September of last year. After a month of continuous decline in international crude oil, Russian officials have once again mentioned the "weapon" of production cuts.
On Wednesday, May 17 local time, Russian President Putin stated that Russia's commitment to reduce crude oil production is intended to support global oil prices. Putin said in a video conference with the Russian government:
"All our actions, including those related to voluntary production cuts, are about our connection with OPEC+ partners, and supporting the environment of specific prices in the global market. Overall, the situation is absolutely stable."
The voluntary production cuts Putin mentioned have been in place in Russia for more than two months. In February of this year, Russia unexpectedly announced a single reduction of 500,000 barrels/day in March as a countermeasure to Western price restrictions and other sanctions, and decided in March to continue the reduction until the end of this year.
In late March, Russian Deputy Prime Minister Novak stated that the goal of reducing production in March would be achieved. Last Tuesday, Wall Street Journal reported that the media said data from the Russian Energy Department showed that the total crude oil production in April was about 9.67 million barrels per day, a decrease of more than 440,000 barrels/day from February, close to the promised reduction level.
This Wednesday, Novak said that Russia has fulfilled its promise to cut production this month and will continue to increase seaborne crude oil exports.
The media previously pointed out that due to Western sanctions, Russia considers oil statistics "sensitive" and has made this type of data confidential last year, making it difficult for outsiders to assess whether Russia has fulfilled its commitment to cut production. Oil market observers have been closely watching Russia's seaborne crude oil exports and supplies to domestic refineries to understand whether the country has been fulfilling its promise.
Despite Russia's repeated emphasis on production cuts, some media have found that Russia's export volume is still hitting new highs.
On the day of Putin and Novak's speeches, this Wednesday, the media said that according to statistics, as of last Friday, May 12, Russia's average seaborne crude oil shipment volume within four weeks had increased again, hitting a new high since the media began tracking details early last year, and has grown by 10% since the first week of April.
As of last Friday, international crude oil futures had fallen for four consecutive weeks, the longest continuous drop since September of last year. On Friday, both WTI crude oil and Brent crude oil fell for three consecutive days, hitting new lows since May 4 for two consecutive days. This Wednesday, oil prices turned upwards during the trading session and remained upwards during the US stock trading session. When the midday refreshed the daily high, both US oil and Brent oil rose by more than 3%, which will hit a new closing high since last Tuesday, May 9.
Commentators said that Wednesday's oil price rebound was partly due to the International Energy Agency (IEA) recently raising global demand expectations, predicting that demand in the second half of the year will be 2 million barrels/day more than supply. In addition, they are optimistic about the prospects of US debt ceiling negotiations. This outweighed the supply-side worries triggered by the US Energy Department's announcement last week that US EIA crude oil inventories had increased for two consecutive weeks.
The day before Putin and Novak's speeches, the IEA released a monthly report on Tuesday estimating that Russia's oil exports in April increased by 500,000 barrels/day from March to 8.3 million barrels/day, a new monthly high since the conflict between Russia and Ukraine last year. Nearly 80% of crude oil is exported to China and India.
The report believes that Russia seems to have no problem finding crude oil buyers, and has raised its expectation for Russia's oil production this year, and because China's demand has grown more than expected, it has raised this year's global oil demand expectations, saying that China's demand increase will account for 60% of the global increase.
The IEA report states that Russia's crude oil production in April was "generally stable" at 9.6 million barrels/day, and the country must cut production by another 300,000 barrels/day in May to keep in line with the production reduction plan.