Oil Output Reduction Will Benefit Russia

Oil and gas condensate production shrank 2.1 percent to 78.46m tonnes, or 9.78m barrels per day, in January-February 2009 from the same period of the previous year, according to a statement from the Central Dispatching Department of the Fuel Energy Complex.

In February alone, oil production declined 9.4 percent to 37.14m tonnes compared to January. Most oil giants showed weak operating results in February 2009 against the previous month and February 2008, experts say.

Nearly all vertically integrated companies reduced output by 10 to 12 percent in February against January, except for LUKoil and Tatneft, who both announced a 9-percent rise in monthly production.

According to RBC, analysts trace the fall to a lack of incentive for oil companies to increase production, since the Urals price has remained below $50 per barrel.

New mining tax cuts that came into effect on January 1 have also failed to contribute to a rise in oil output, experts point out. They believe that Russian energy producers have been following the example set by OPEC, which has been cutting production since January 1.

On the whole, analysts view the current trend of lower oil output as a long-term economic benefit rather than a burden for Russia, saying that the joint decrease in oil production by OPEC and independent exporters, such as Russia, has actually prevented oil prices from plummeting even further.

Source: RBC

Author: Ksenia Kochneva