Russian crude output hits post-Soviet record defying price slump

STEPHEN BIERMAN

 

MOSCOW (Bloomberg) -- Russian oil production broke a post-Soviet record in October for the fourth time this year as earlier investments boosted output and producers prove resilient to lower crude prices.

 

Production of crude and gas condensate, which is similar to a light oil, averaged 10.776 MMbpd during the month, according to data from the Energy Ministry’s CDU-TEK unit. That is an increase of 1.3% from a year earlier and up 0.3% from the previous month.

 

“Russian oil production is still reflecting oil prices above $100/bbl due to long lead times in the investment cycle,” Alexander Nazarov, an oil and gas analyst at Gazprombank JSC, said by email from Moscow. “The reason behind growth this year dates back to 2010-2014, when a number of projects were financed.”

 

Output has kept growing even as the Organization of Petroleum Exporting Countries chose to defend market share rather than cut output amid a supply glut last year, a decision that sent prices tumbling. Gazprom Neft PJSC and Novatek OJSC are ramping up output at one of the country’s biggest new projects. Russia’s tax policies insulate the industry from swings in oil prices, with the state bearing most of the risk and reward.

 

The ruble’s slump over the past year, which has tracked weaker crude prices, has made oilfield services, including drilling, cheaper and supported operating margins, Nazarov said.

 

Russian crude exports rose to 5.42 MMbpd in October, a 10% gain from the previous year and up 1.7% from the previous month.