Russian oil data showed a rise in the number of idled wells in March, adding another contradictory element to the murky picture of whether the country is actually cutting crude output as promised.
Moscow pledged to curb production by 500,000 barrels a day in retaliation for Western energy sanctions and to support the price of its oil. Deputy Prime Minister Alexander Novak has said the cuts were implemented at the end of March and continued into April, but official production data is holding up and tanker tracking does not show a corresponding drop in seaborne exports.
With oil futures falling below $70 a barrel in New York on Wednesday on worries about the risk of recession and weak demand, the question of whether Moscow is ignoring the OPEC+ cuts deal has gained urgency.
Official Russian oil production data was classified after the invasion of Ukraine due to its “sensitive” nature. That means market watchers must rely on other figures such as seaborne exports and domestic flows to gauge whether the cuts have materialized.
The ratio of idle and shut-in wells could be an indication that Russian producers have taken steps to reduce production. They jumped to 18.1% in March, compared with 15.6% in February, according to industry data seen by Bloomberg. This is the largest share of idle wells for the nation since May 2022, when the country was making short-term production cuts amid the first waves of international energy sanctions following the invasion of Ukraine.
But the numbers have some key limitations. They do not provide information on the productivity of affected wells, making it impossible to measure the actual impact on production.
Another key indicator shows no evidence of significant reductions in Russian output. The country’s seaborne crude exports rose to 4 million barrels a day in the week to April 28, a level it has surpassed only once since its troops invaded Ukraine in February 2022, according to tracking data of tankers compiled by Bloomberg.
However, crude oil shipments abroad do not tell the whole story. Russia has a large domestic refining industry where crude oil intake is currently in flux due to seasonal maintenance. It also exports oil through pipelines, with little visibility on the level of flows.
Two oil producers, Bashneft PJSC and Slavneft PJSC, a joint venture between Rosneft PJSC and Gazprom Neft PJSC, posted the largest increase in the share of idle oil wells, the data showed. For Bashneft, a Rosneft unit that operates mostly mature oil fields in the Volga-Urals region, the share of such wells rose to nearly 44 percent from 29.2 percent in February.
Major oil producers such as Rosneft, Lukoil PJSC and Tatneft PJSC also increased the number of idle wells, but to a lesser extent.
