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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Russian Oil Production May Fall To 18-Year Low On EU Oil Embargo

  • WSJ: full oil embargo could send Russian production to 9.6 million bpd.
  • IEA estimates that Russia already shut in nearly 1 million bpd in April.
  • Russian Finance Minister Siluanov. production could drop by 17 percent this year due to the sanctions.
Rosneft

Russia’s crude oil production could drop to its lowest level since 2004 if the EU imposes an embargo on imports of Russian oil, according to estimates from the International Energy Agency (IEA) and The Wall Street Journal.

The tightening screws on Russian oil exports and the self-sanctioning of buyers in the West could see oil production plummeting by more than 1 million barrels per day (bpd) this year compared to 2021, to 9.6 million bpd, the Journal notes, citing data from the IEA’s monthly market report published today. This would be the lowest level of Russian crude production in 18 years.

In the closely watched Oil Market Report today, the IEA estimated that Russia already shut in nearly 1 million bpd in April, driving down global oil supply by 710,000 bpd to 98.1 million bpd.

“Russia’s isolation following its invasion of Ukraine is deepening as the EU and G7 contemplate tougher sanctions that include a full phase out of oil imports from the country. If agreed, the new embargoes would accelerate the reorientation of trade flows that is already underway and will force Russian oil companies to shut in more wells,” the IEA said.

So far, Russian exports have held up, but as of May 15, the major international trading houses will have to halt all transactions with state-controlled Rosneft, Gazprom Neft, and Transneft, the agency noted.

“Following a supply decline of nearly 1 mb/d in April, losses could expand to around 3 mb/d during the second half of the year,” the IEA said, referring to Russia’s oil supply.

Russia’s oil production is already falling and will continue dropping in the coming months and years as Moscow will not be able to redirect to China and India all the volumes it is losing in Europe—its biggest oil market before the invasion of Ukraine. Restrictions, combined with the lack of access to Western technology to pump harder-to-recover oil and enhance production from maturing wells will hit Russia’s oil industry not only in the near term but also in the long term, analysts say.

Russia itself has admitted that its oil production could drop by 17 percent this year due to the sanctions, TASS news agency reported, citing Finance Minister Anton Siluanov. In April alone, oil production fell by 9 percent from March. 

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Mamdouh Salameh on May 13 2022 said:
    This article is based on ifs, untruths and unsubstantiated claims. The if is that if the EU bans imports of Russian oil, then Russia’s crude oil production could drop by 1.0 million barrels a day (mbd). However, the EU is yet to take this decision amid divisions among members of the EU and a threat by Hungary to veto it.

    Any projections by the IEA about a decline in Russia’s oil production are politically-motivated, biased and untrue. Therefore they can be ignored.

    And despite offering no proof, the author continues to peddle the same untruths about buyers in Europe and major international oil traders shunning Russian oil. If that was true, we would have seen Brent crude by now headed toward $140-$150 a barrel.

    And contrary to unsubstantiated claims by the IEA, Russia’s oil production in May has been on the rise averaging 10.28 mbd, a mere 156,000 barrels a day (b/d) short of its OPEC+ quota according to Alexander Novak, Russia’s Deputy Prime Minister.

    Another unsubstantiated claim is that lack of access to Western technology will hit Russia’s oil industry not only in the near term but also in the long term. This is another plain lie. Russia neither needs Western technology nor Western financing. It has both. The development of the huge Russian Arctic oil and gas reserves is a case in point. Russia will be adding 1.5 mbd to its oil production by 2024/2025.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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