MOSCOW: Goldman Sachs’ commodity analysts are a merciless bunch. Just the other day they warned that if OPEC fails to agree on a freeze, crude oil prices will dive back to US$40, adding that even if the agreement was reached, non-OPEC producers would continually ramp up their production, rendering any deal ineffective.
Now, the same analysts have released a report saying that Russia’s oil output will hit 11.7 million bpd in 2017, an upward revision of a previous estimate that claimed average daily output would be nearer to 11.4 million barrels. The earlier estimate envisaged the 11.7 million bpd mark wouldn’t be reached until 2018, but Russia appears to be ramping up production faster than most observers seem to have expected. It’s a bit strange that the investment bank’s analysts were this surprised, given that earlier this year, Goldman Sachs said Russia’s oil companies can remain free cash flow positive at any price above US$10 a barrel of crude. Perhaps it was the rate of production increase that was surprising, rather than the increase itself.
Goldman wasn’t the only one surprised. The International Energy Agency (IEA) said back in July that Russia’s output was bound to fall to 10.94 million bpd this year because of oil transportation challenges. The challenges included pipeline capacity that would be insufficient to handle all the production from new fields. It seems that the local E&Ps were able to overcome these challenges, because in its latest Oil Market Report, the IEA noted that the Russian energy business had “impressive resilience” as well as a 4-percent increase in local demand in August, bringing the total daily figure to over 4 million barrels of crude, despite the ongoing recession.
