Russian output slumps as oil price hits a record

Russian oil production, for years a vital font of new crude for world energy markets, has begun to stagnate and even slump, adding to market uncertainties that have helped push oil prices to records even as the global economy founders.

Russian supply in the first three months of this year fell for the first time this decade, averaging 10 million barrels a day, a 1% drop from the year-earlier period, according to the International Energy Agency, the industrialized world’s energy watchdog. That is dismal news for a country that saw double-digit-percentage output growth earlier this decade.


On Monday, U.S. benchmark crude rose $1.62, or 1.5%, on the New York Mercantile Exchange to settle at $111.76 — an all-time high, even after adjusting prices during past booms for inflation.

The slowdown in Russia, the world’s second-biggest oil exporter after Saudi Arabia, has intensified already widespread concerns about long-term oil supply amid diminishing output from once-huge fields like Alaska’s Prudhoe Bay and Mexico’s Cantarell field in the Gulf of Mexico. Fading optimism that strong Russian output this year would offset ebbing flows from once-reliable sources like the North Sea has increased jitters in an already tense oil market.

As prices have soared, Saudi Arabia and other members of the Organization of Petroleum Exporting Countries have argued that anticipated bursts in new supplies from non-OPEC countries mean the world hasn’t needed additional barrels from OPEC. Even with an easing in oil-demand growth due to the U.S. economic downturn, many analysts still worry that a global supply pinch later this year could send prices still higher.

“There isn’t a lot of supply coming on right now, so this [lack of non-OPEC growth] is framing the whole narrative of the market,” said Roger Diwan, a financial energy adviser at PFC Energy in Washington.

WSJ