Russian oil production hits peak in September

Russia’s energy ministry reports that Russian crude oil production in September exceeded by a small margin its previous peak in the post-Soviet era. Russia’s average daily production in August rose by 1.3 % y-o-y to 11.4 million barrels. Russia and OPEC agreed in 2016 on voluntary limits to oil production, a scheme that since succeeded in substantially raising oil prices. For example, the price of Urals-grade oil, slightly over $50 a barrel at the start of 2017, now stands at over $80 a barrel. Russia and OPEC agreed in June to get rid of production ceilings. Russian oil output currently exceeds the former agreed ceiling by 400,000 barrels a day. OPEC countries have also boosted their production.

Russian oil production at present is already higher than the economy ministry’s latest forecast for 2019 (see BOFIT Weekly 37/2018). The ministry expects production to rise further in 2020−21 by about 1 % a year, and then ease into a slow decline. It is therefore unclear how long the current production level can be sustained without new investment.