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Russian oil output near record as prices fail to slow momentum

Monday, February 2, 2015 - 17:00
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Russian oil production remained near the post-Soviet record reached last month, as the collapse of crude prices since June has so far failed to visibly disrupt growth, and exports jumped.

[MOSCOW] Russian oil production remained near the post-Soviet record reached last month, as the collapse of crude prices since June has so far failed to visibly disrupt growth, and exports jumped.

The country's output dropped less than 0.1 per cent from December to 10.657 million barrels a day, according to preliminary data e-mailed today from the Energy Ministry's CDU-TEK group.

Oil prices have fallen to the lowest since 2009 amid surging US output and a November decision by Opec to abandon its role as the global swing producer.

Russia, which depends on the oil and natural gas industry for half of its budget, is on the brink of a recession, pressured by crude's bear market and US and European Union sanctions.

Crude output will probably remain on par with 2014, although the current low prices present a risk, Energy Ministry Alexander Novak said last month, citing producers' plans.

Selling oil abroad is probably more profitable for some producers than domestic sales, given lower prices, Transneft Chief Executive Officer Nikolay Tokarev told Bloomberg on Friday.

"We already feel this tendency in January."

US and EU sanctions in response to Russia's annexation of Crimea last year and what they say is President Vladimir Putin's support for separatists in eastern Ukraine are unlikely to affect Russia's production of conventional oil until 2035, Vladimir Drebentsov, BP Chief Economist for Russia and CIS, said in mid-January.

The US and EU are targeting the energy sector by banning exports of equipment and technology used to tap hard- to-extract crude and offshore resources in the Arctic.

Oil exports rose to 5.26 million barrels a day in January, up 24 per cent from a month earlier, as the government changed the tax rate to calculate customs duties.

Brent crude, used to price about half of the world's oil including Russia's main export blend Urals, fell as much as 3 per cent on Monday to US$51.41 a barrel on London's ICE Futures Europe exchange. Its 2014 peak was US$115.71 in June.

The previous post-Soviet oil production record was 10.66 million barrels a day in December, CDU-TEK data show. Soviet-era crude and condensate production peaked at 11.48 million barrels a day in 1987, according to BP Plc data.

The CDU-TEK output figure shows crude and condensate, an ultralight oil that yields a greater proportion of high-value fuels.

BLOOMBERG