Russia continues to be a surprise in non-OPEC production. Higher than expected crude and condensate production is one reason non-OPEC crude and condensate supply will increase more than 700,000 b/d in 2015, according to ESAI Energy’s One Year Global Crude Oil Outlook . In 2016, however, lower production in Russia and elsewhere will result in no growth in non-OPEC crude supply.

In May, 10.67 million b/d of crude and condensate were produced in the country. Since producing more than 10.6 million b/d for the first time in December 2014, Russia has sustained output at or above that level through the first five months of 2015. One small producer has led what ESAI Energy believes will amount to a temporary increase in Russian production. Gazprom Neft-Novatek JV Arktikgaz has added more than 100,000 b/d of new production in less than a year, achieving a higher production rate than many expected and doing so more quickly than anticipated. Otherwise, production trends have followed ESAI Energy’s expectations. Most notably, the rate of annual growth of supply in East Siberia continues to slow-from more than 100,000 b/d until 2013 to 70,000 b/d in 2014 and probably less than 50,000 b/d this year.

“Russia is one of the surprises in non-OPEC production, boosting production despite widespread expectations that production would decline in 2015,” comments Andrew Reed at ESAI Energy. “In January, ESAI Energy predicted average 2015 production would be 25,000 b/d lower than in 2014. The International Energy Agency forecast a 140,000 b/d decrease in its January Oil Market Report. In view of the latest developments, however, we now forecast an increase of 75,000 b/d for the year. While ESAI Energy has revised up the outlook for 2015 production, long-term trends such as slower growth in East Siberia are in keeping with our view that by the start of 2016 Russian output will transition to a gentle decline.”

Russian production in 2015 has implications for OPEC. Ahead of Russian energy minister Alexander Novak’s meeting with OPEC ministers, the Russian official has already signaled that Russia does not intend to cut production. Not only will Mr. Novak not offer OPEC an intentional production cut, there will not be a natural decline in Russian production in 2015 either.
Source: ESAI Energy