Russia to make compensatory OPEC+ oil production cuts through 2025

(Bloomberg) – Russia plans to make extra crude oil production cuts to compensate for pumping above its OPEC+ quota in October and November this year, then between March and September of 2025.

The compensation cuts will be made to account for overproduction that has occurred from April, Russia’s Energy Ministry said in a Telegram statement.

“Russia overproduced in June but every month starting from April, the output level has been decreasing,” according to the statement. “Russia will resolve the overproduction issue in July and will fully meet its requirements.”

The excess volume during the first six months of the year averaged 480,000 bpd, OPEC said in a separate statement.

Russia, the largest crude oil producer among OPEC and its allies, has also been one of the group’s principal laggards in implementing the supply agreement intended to shore up global prices.

Ever since the start of its cooperation with OPEC, Russia has said it can’t cut production significantly in late autumn and winter due to the geology of its oil fields and climate conditions.

Fellow OPEC+ laggards Iraq and Kazakhstan are also set to compensate for excessive output through September 2025. During the first six months of this year, Iraq pumped an extra 1.184 MMbpd and Kazakhstan an extra 620,000 bpd, according to the alliance’s statement.

Unlike Russia’s schedule, which skips a few months, the updated compensation plans for the other two nations envision regular monthly cuts between July 2024 and September 2025.

Internal OPEC+ documents compiled for the group’s monitoring committees, which were obtained by Bloomberg, show that members had a poor track record of compensating for overproduction in previous rounds of cuts in 2021.

Earlier this month, Russia mulled making the compensation cuts in summer and early fall for technological reasons, while also ensuring its domestic fuel market will be well-supplied during the cold months, according to people familiar with the discussions.

The extra curbs are expected to happen at Western Siberian fields, where production can be regulated, the people said at the time. That is Russia’s more mature oil province, producing lower-quality oil than East Siberian projects pumping the premium ESPO crude blend.