Russia’s oil production is estimated to have declined by 10 percent since the start of the Russian invasion of Ukraine, satellite images of flaring at oilfields and leaks from traders and Russian statistics suggest, Bloomberg Opinion columnist Javier Blas writes.
Russian oil and condensate production averaged around 10.2 million bpd in the first two weeks of April, according to consultancy OilX, which analyzes flaring at Russian oilfields using NASA images. The output in the first half of April is much lower than 11.1 million bpd production in February and 11 million bpd in March, Bloomberg’s Blas notes.
A chronic decline in Russian oil production due to sanctions and “buyers’ strike” could lead to another, more sustained jump in oil prices.
Russian crude output started to feel the sting of the sanctions and self-sanctioning of buyers and was 300,000 bpd below target in March, according to an OPEC+ report seen by Reuters this week. Russia’s crude oil production averaged 300,000 bpd below target at 10.018 million bpd, per secondary sources in the report.
Russia’s oil industry is already showing signs of slowing down as Western buyers shun Russian oil while Moscow struggles to replace lost sales in the West with sales in emerging Asian markets. The war Putin started in Ukraine is hitting home: storage capacity is full, infrastructure and shipping logistics prevent Russian from exporting all the oil unwanted in the West to China and India, refineries are cutting run rates as product storage is overflowing, and as a result, companies are scaling back crude production.
Russian oil supply is expected to fall by 1.5 million bpd in April, with shut-ins projected to accelerate to around 3 million bpd from May, the International Energy Agency (IEA) said in its monthly report last week.
In a rare firesale, Rosneft is now reportedly offering as many as 37.4 million barrels of the flagship Urals crude for May and June loadings—a sign that Russia’s top oil producer is racing to award spot tenders before any possible EU embargo on Russian oil comes into force.
Major international traders have already said they would either cut or phase out purchases of Russia’s crude in the coming weeks. The world’s top independent oil trader, Vitol, plans to wind down its activities involving Russian crude oil by the end of this year, Bloomberg reported last week, citing a spokesman for the company.
By Tsvetana Paraskova for Oilprice.com