Novak says Russia can increase oil production in July

(Reuters) - Russia plans to increase oil production next month as export flows are being redirected to avoid Western sanctions, energy officials said on Thursday, predicting domestic oil output would be either flat or decline slightly this year.

"In fact, we are close to the February levels when we had it (oil production) at 10.2 million barrels per day (bpd), we plan to increase it further in July depending on companies' plans," Deputy Prime Minister Alexander Novak told reporters.

Production from the world's third biggest producer after the United States and Saudi Arabia dropped by about 10% to 10.05 million bpd in April from February, after some buyers postponed or refused Russian barrels due to sanctions.

Production is being restored as companies redirect flows, Novak said on Thursday.

Western sanctions against Russia over the conflict in Ukraine prompted many oil importers to shun trade with Moscow, pushing spot prices for Russian crude to record discounts against other grades.

That provided refiners in India and China an opportunity to snap up low-priced crude.

Russian oil production is expected to remain either flat or to decline by 3-5% this year, Nikolay Shulginov, Russia's energy minister, told Izvestia newspaper in a separate interview on Thursday.

He said the European Union's goal to replace Russian fossil fuels by 2027 was a political statement, as it was not immediately possible for the bloc to replace Russian gas and oil, given they account for around 40% and 30% of the bloc's needs respectively.

(Reporting by Reuters; Editing by Jason Neely and Mark Potter)