Russia is smashing post-Soviet oil records, producing more crude in September than it has in decades and raising questions of whether promised output cuts by OPEC would succeed in reducing the worldwide oil glut.
Russia produced 11 million barrels per day in September, a 200,000-barrel or 2 percent jump over its previous post-Soviet record, set in January, and a 400,000-barrel or 4 percent increase on the year, the country's energy ministry reported. Analysts at Tudor Pickering Holt pegged the rise to a weak ruble, meaning Russia, which depends heavily on oil to support its economy and finance its government, has to pump more oil to generate the same amount of revenues.
Investment banking firm Piper Jaffray & Co. called the increase "staggering."
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The Organization of the Petroleum Exporting Countries last month reached a preliminary agreement to cut production by up to 750,000 barrels a day, with plans to formalize the reduction at OPEC's formal meeting in Vienna in November. That agreement has helped push oil prices toward $50 a barrel again. Also supporting prices has been a steady drop of petroleum stockpiles in the United States.
The Energy Department reported Wednesday that commercial crude inventories fell by about 3 million barrels, the fifth consecutive week of declines amid strong energy demand. Crude settled at $49.83 a barrel, the highest close more than three months.
Russia's record production, however, has raised concerns that non-OPEC producers will offset any reductions in output by the cartel. U.S. shale drillers, for example, have put scores of rigs back to work as prices have come off their February low of $26 a barrel and hovered between $40 and $50 a barrel in recent months.
Russia has at times promised to cut production and aligned itself with OPEC to reduce supply and drive up oil prices. If so, it didn't last month.
The rise was driven in part by an 8 percent bump in production on the North Pacific island of Sakhalin, analysts said. State-owned oil companies Rosneft and GazpromNeft, plus the private giant Lukoil, contributed the largest increases.
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Still, analysts aren't convinced the Russian production spike will last. Piper Jaffray said September figures were, in fact, a few thousand barrels lower than the International Energy Agency expected. Tudor Pickering said Russian Energy Minister Alexander Novak has discussed freezing production just under 11 million barrels per day. And Rosneft and Lukoil have predicted their volumes would decline in the second half of this year due to financial constraints.
