BOFIT Viikkokatsaus / BOFIT Weekly 2017/04

Last year Russia produced roughly 550 million metric tons (an average of 11 mbd) of crudeoil (includes gas condensates). It was the highest level of production since the dissolution of the Soviet Union. Production was up nearly 3 % y-o-y. Fastest growth was recorded in the new oil fields in the Sakhalin and Yamal-Nenets regions, while output at mature fields continued to decline.

Because growth in oil production depends on new deposits that are more difficult to exploit, output growth is expected to slow considerably during this year and in coming years. In addition, this year's output should be restricted (at least in the first half) under the agreement between Russia and other oil-producing nations. Energy minister Alexander Novak reports that production will gradually be cut from last October's level to around 10.9 mbd in May and June. At that level, Russian oil production in the first half of this year would roughly match that of 1H16. Prior to the agreement on restricting output, Russia's economy ministry expected oil production to rise by 0.7 % this year. IEA's forecast that was published after the agreement sees Russian output rising 0.3 % this year, while OPEC's forecast expects a drop of 0.2 %.

The Joint Ministerial Monitoring Committee of the countries involved in the deal held its first meeting last weekend. While there were no production figures for this year yet available, the ministers said that production in their countries has fallen as planned. The price of oil jumped as the deal was signed at the end of November. Since then the Brent crude spot price has stabilised around $55 and the futures contract price at end-2017 around $57 a barrel.