Russian oil producer Tatneft has cut its output by around a fifth this month, before a global supply deal takes effect in May, because storage capacity is full and European demand is weak, according to sources and data seen by Reuters.
Facing an historic oversupply, Russia and a number of other leading oil producing nations, a group known as OPEC+, agreed to jointly cut production by nearly 10 million barrels per day (bpd). Moscow has ordered companies to reduce production by a fifth from May 1.
But mid-sized producer Tatneft has taken pre-emptive action and already cut production because, unlike other Russian producers, it has no access to Asian markets and mainly supplies Europe, where demand has collapsed.
“We are reacting to the demand,” a company source told Reuters.
Tatneft operates in Tatarstan in central Russia which became the country’s main oil province in the 1970s with output of 2 million bpd, helping the Soviet Union fund its arms race with the United States.
Production fell steeply in the 1990s but has recovered in recent years thanks to modern but expensive recovery technologies. Over the last couple of years, Tatneft was pumping an average of 29 million tons of oil per year, or nearly 600,000 bpd.
In April, that level has fallen to around 65,000 tonnes a day or to 480,000 bpd, preliminary data from the Russian energy ministry seen by Reuters showed, Tatneft’s lowest since the early 2000s.
“We will continue with production as it now is from now on,” the second Tatneft source said. “A fall in April is due to lack of storage, everything is full.”
Tatneft is one of the oldest Russian oil producers, whose fields were discovered in the frenzy of the Soviet Union’s quest for oil in the 1940s during the fight with Nazi Germany.