Russia's crude oil output could decline by 18 percent by the end of next year, the U.S. Energy Information Administration has forecast, citing the European Union's planned embargo on Russian oil imports.
The U.S. energy authority forecasts that Russian oil output will decline from 11.3 million bpd in the first quarter of 2022 to 9.3 million bpd in the final quarter of 2023 as a result of the EU embargo on both crude oil and refined product imports.
The agency noted, however, that "This forecast does not reflect restrictions on shipping insurance, as details regarding such restrictions were not available when we finalized this forecast on June 2."
The EIA also noted that the sanctions, as well as new punitive action from the West, could push Russia's oil production rates even lower, lifting oil prices further.
The European Union earlier this month agreed to embargo all seaborne imports of Russian crude oil within six months and of refined oil products within eight months.
Oil will continue to flow along the Druzhba pipeline that supplies Central Europe, but Poland and Germany have pledged to quit Russian crude by the end of the year. This would effectively reduce the intake of Russian crude and products into the EU by 90 percent, per plans.
Russia has shed some 1 million bpd in crude oil production since the start of what it calls a special military operation in Ukraine, following sanction action from the West. According to Moscow, the decline is already being reversed. According to other sources, including the IEA and OPEC, Russia could see a much deeper decline in its oil output.
Some wells that have been shut down since the invasion of Ukraine at the end of February may never return to produce oil again, permanently eroding some of Russia's spare production capacity, analysts say.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More