Russia likely to push for higher OPEC+ quota in May on fuel demand uplift: analysts

Moscow — With the OPEC+ group due to meet April 1 to determine May production levels, analysts expect Russia to keep maintain its push for a moderate output increase given increased demand for fuel.

S&P Global Platts Analytics expects the meeting "to be a repeat of the March 4 outcome" and the alliance to remain cautious about raising output.

While a third round of lockdowns across Europe and the fragile global oil market are expected to persuade the alliance to roll over April quotas, the situation in Russia is slightly different.

Mass vaccination and lighter coronavirus restrictions have driven domestic gasoline and diesel demand in Russia beyond pre-pandemic levels already in early March, which allowed Russia to secure an easing of its production quota by 130,000 b/d for April.

To meet gasoline demand, Russia is even considering deliveries from neighboring Belarus to offer a cheaper alternative.

"The OPEC+ decision not to raise oil production levels in April, the weak ruble and the approaching summer season, when traditionally demand for gasoline reaches intra-year highs, will likely contribute to further growth in motor fuel demand," Sberbank Investment Research said in a note.

Demand for jet fuel may also spike in April as Russia resumes flights to several countries and increases the frequency of existing local and international routes to 27 countries.

These factors have led analysts to assume that in May "Russia is likely to lift production yet another notch and the [OPEC+] group in total is probably fine with that," Bjarne Schieldrop of SEB Research said.

Analysts at VTB Capital said Russia "continues to state that production needs to be increased."

Russia's output quota has risen gradually throughout the year and is currently 9.379 million b/d, excluding condensate, through April.

At the same time, according to the OPEC+ deal's original timeline for increasing production, Russia's output was to stand at 9.495 million b/d since January.

"As a result, Russia has just 115,000 b/d left out of the 500,000 b/d production quota softening set by the OPEC+ agreement back in December 2020," VTB Capital said.

Given that would be granted by the group, Russia's liquids output in 2021 will rise 0.5% year on year to 514 million mt, VTB Capital said.

Platts Analytics assumes that Russia and Kazakhstan will be allowed to raise quotas by a combined 135,000 b/d next month, which would put Russia's output level at 10.72 million b/d in May.

Official position

Ahead of the OPEC+ talks, Russia and Saudi Arabia did not hold traditional talks at the highest level -- between President Vladimir Putin and Crown Prince Mohammed bin Salman.

However, Kremlin spokesman Dmitry Peskov did provide a short comment, maintaining that relations between the two countries were "on a very good level."

The Kremlin has so far refused to state its official position on Russia's quota for upcoming negotiations.

However, Russia has repeatedly shared its concerns about US shale producers overtaking its market share as a result of higher prices.

Since January, Dated Brent gradually risen from about $50/b and was assessed at $63.535/b on March 30.