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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