Russia hasn’t implemented its pledged crude-output cuts, with exports hitting a postwar high as Moscow seeks to boost energy revenue to fund military spending, according to the International Energy Agency (IEA).

(May 16): Russia hasn’t implemented its pledged crude-output cuts, with exports hitting a postwar high as Moscow seeks to boost energy revenue to fund military spending, according to the International Energy Agency (IEA).

The Kremlin promised to cut production by 500,000 barrels a day in March and maintain the curbs for the rest of the year in retaliation for Western sanctions. While Russia’s Energy Ministry said the cuts were close to that target last month, tanker-tracking data have shown record export volumes by sea while domestic crude processing is only beginning to drop amid refinery maintenance.

Meanwhile, the government in Moscow has classified oil statistics due to their “sensitive” nature, making it difficult to assess progress of the curbs beyond the assurances of energy officials.

Russia’s crude production in April was about 9.6 million barrels per day (mbpd), the IEA said in its monthly report on Tuesday (May 16). That’s only 200,000 barrels below the February baseline for the cuts, according to the agency.

“By our estimates, Moscow did not deliver its announced 500,000 barrel-a-day supply cut in full,” the Paris-based IEA said. “Indeed, Russia may be boosting volumes to make up for lost revenue.”

The country’s oil-export revenue rose by US$1.7 billion (RM7.64 billion) to US$15 billion in April, but was still down by 27% from a year earlier, according to the report. To comply with the Kremlin’s pledge, Russian producers would need to cut another 300,000 barrels a day of crude output in May, the IEA said.

Russia’s total production, including crude and a light oil called condensate, in April was relatively stable at 10.93mbpd, some 470,000 barrels lower than before the invasion in Ukraine, according to the IEA. The agency revised up its annual estimate for the nation’s production to 10.7mbpd.

The discount at which Russian crude trades compared with benchmark Dated Brent narrowed last month to US$24.35 a barrel, according to the IEA. As a result, the weighted-average price of the nation’s seaborne supplies climbed to US$60.12 a barrel, slightly above the crude-price cap set by Group of Seven countries (G7), the agency said.

Still, the price of the Russia’s Urals crude blend delivered in the country’s key western ports remained below the cap, according to the IEA estimates, which would allow the use of European insurance and shipping services for those shipments. The figures provided by the IEA are used by the G7 to assess the efficacy of their price caps.

The price of ESPO blend, sold into the Asia-Pacific market, averaged at US$73.18 a barrel. It has consistently traded above the price cap since it was introduced.

Despite narrowing, the discount on Russian oil is still large enough to encourage strong demand for the nation’s barrels, according to the report. “Russia seems to have few problems finding willing buyers for its crude and oil products,” the IEA said.