Good morning; here's what the Oilman has for you today:

• U.S. Oil Output Growth May Be Over for the Year

• Is Russia Cheating on Oil Cuts?

• Tweet of the Day

U.S. Oil Output Growth May Be Over the Year

Oil production in the U.S. dropped by 53,000 bpd in February after an extended streak of monthly rises.

This may well be an early sign of a looming growth slowdown to make itself evident by the end of the year.

Sometimes we pump more; sometimes, we don’t

It’s the simplest market force at play. When prices jumped last year on Russia’s Ukraine invasion, drillers boosted production.

Who wouldn’t when crude was over $100 per barrel?

But then prices began sliding as people started paying attention to other things, such as U.S. manufacturing activity.

Then banks started collapsing, and that added one more thing for people to think about.

Prices slid further.

And drillers started curbing drilling.

Who wouldn’t?

The Gulf of Mexico was down 79,000 bpd and Alaska was down 2,000 bpd even as the Lower 48 were up by 28,000 bpd.

It gets more complicated

So, we have U.S. drillers curbing drilling, and we also have OPEC+ cutting output.

And that’s U.S. output for February when prices were higher than they are now.

Meantime, a lot of people are talking about the recession, and they’re talking about it because oil demand is falling, too.

It’s not looking good.

It’s never good when prices are down because of weak demand rather than strong production.

But wait until production catches up with demand, which will be later in the year.

Then we might end up with lower production and higher prices.

The silver lining? Those higher prices will get drillers drilling again.

Unless a couple more banks collapse in the meantime bringing about Armageddon.

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Is Russia Cheating on Oil Cuts?

Three months ago, Russia said it would cut oil output by 500,000 bpd in response to Western sаnctions.

But exports of both crude and fuels run high, sparking suspicions that it might be cheating on its OPEC+ partners.

Idled wells, full tankers

Bloomberg reported this week that Russian well data shows the number of idled wells rose to 18.1% in March from 15.6% in February.

At the same time, Russia’s seaborne oil exports hit the highest in a year last month, surging 22% higher than usual pre-war levels.

What gives?

First, Russia has stopped reporting official production numbers, so we’ve only got its word that it is cutting production.

In other words – Russia could be lying. It wouldn’t be the first time.

Second, it’s got a pretty solid refining industry at home that’s currently in maintenance season, meaning lower domestic demand.

The more important question is…

If Russia’s lying, what will Saudi Arabia make of that?

Russia and Saudi Arabia teamed up to lead the OPEC+ alliance and have been on the same page for years now.

Well, except for that short oil price war when both tried to outproduce each other to prove they can, basically.

Since then, however, the two have been invariably in agreement on oil policies.

But what if Russia’s lying about its production cut?

Maybe it’s not that important since Russia is not technically part of the OPEC+ cut. Russia is voluntarily cutting production.

On the other hand, it would be dishonest to say you’re cutting production and then not cut it.

And the Saudis are sensitive folks.

Just look what they did to Biden because of that fist bump with the Crown Prince.

Imagine another Russian-Saudi price war right now.

Around the Global Patch

🇺🇸 Ukraine conflict spurs investment in Kazakhstan.
🇨🇳 Exploring the gas potential of the South China Sea.
🇷🇺 Russian oil ban hits PKN Orlen with million-dollar losses daily.

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