Too much time is wasted on what the Russians want.
Why? Because Russia has never reduced production since the 2016 production cut agreement.
We see this in Russia’s crude exports, which are higher than when the cut was agreed upon.
We believe the Saudis know this, but keep Russia in the group for optics.
At the end of the day, it’s what the Saudis want.
Welcome to the Russian cut edition of Oil Markets Daily!
The Russians put on quite the theatrics when it comes to OPEC+ production cut meetings. Alexander Novak, Russia’s Energy Minister, put on quite the show late last year when he flew back to Moscow for an emergency meeting with Russia’s oil producers to discuss the production cut agreement. While each meeting seems to come down to a nail biter with the Russians reluctant to cut production, everyone in the media takes Russia’s promise at face value.
What’s hilarious is the enormous amount of attention put on what Novak says about Russia’s oil production each month. So we suggest a more truthful way of gauging whether or not Russia is really cutting its oil production – watch exports.
Source: Kpler, HFI Research
The reality is that Russia has never reduced its oil production since the 2016 production cut agreement. Despite the Russian economy starting to grow again, its oil exports have only climbed despite an increase in domestic oil consumption? How is that even possible?
If Russia truly cut production, shouldn’t seaborne exports fall to reflect the decrease in overall supplies? We know Russia doesn’t have very much domestic oil storage to be exporting out an elevated amount despite curtailing production, so something clearly doesn’t match.
What’s clear to us is that Russia has been playing everyone for fools. Exports have not decreased, reflecting the simple truth that Russia has never reduced production, period. The full report is here: https://seekingalpha.com/article/4254222-russia-edition-production-cut-really-cut?v=1555103127&comments=show