Russian oil production drops
MOSCOW—Russian oil production has dropped this year for the first time in a decade, adding to market worries over supplies as oil prices headed for new highs.
Russia, the world's biggest oil exporter after Saudi Arabia, averaged 10 million barrels per day from January through March, the International Energy Agency said in a recent report. That marked a 1 percent drop compared with 2007 and the first time production has failed to exceed previous-year figures since 1998.
Russian officials have acknowledged that supply growth appears to have hit a ceiling, at least for now.
The Energy Ministry called the drop a "stagnation" last week, and Leonid Fedun, vice president of independent producer OAO Lukoil, said in comments published Tuesday that supply had peaked.
"The period of intense oil production is over," Fedun was quotes as saying by the Financial Times.
David Fife, an IEA oil analyst, said the Paris-based agency was taking a "cautious approach" on the news. An IEA forecast on future production in Russia is to be withheld pending spring results, which could eliminate weather-related distortions typical of winter months, he said.
But, assuming that Russia's oil production has peaked, the Organization for Petroleum Exporting Countries can pump out more barrels to meet demand and keep prices from skyrocketing. OPEC has positioned itself as the world's marginal supplier and can pick up the slack in case of external supply shocks.
Calls to the Natural Resources Ministry's branch that deals with oil output data went unanswered Tuesday.
Artyom Konchin, an analyst with Aton Capital, put Russia's oil supply lull down to high taxes and insufficient reinvestment into infrastructure that could increase production from existing fields.
"It's not that we don't have enough oil," he said. "We just don't have enough capital going into developing the fields."
Konchin said the fact that Russian oil accounted for roughly 12 percent of world supply makes this year's production drop "not particularly significant."
