Oil production reduction imminent for Russia due to drone damage
Russian oil production is facing pressure due to a series of attacks on its energy facilities, primarily by Ukrainian drones. These attacks, aimed at cutting Russian government revenues and depleting its war chest, have intensified since August.
The attacks have significantly restricted Russian oil production, particularly at the large refinery in Kirishi near St. Petersburg. As a result, Russian oil producers may need to reduce production for security reasons. So far, the Russian side has been securing production through military defense measures during large exercises like Sapad 2025, but no specific operational production safeguards or countermeasures by oil producers themselves have been detailed publicly.
The ongoing attacks contradict the agreed increase in Russia's oil production quota within OPEC+. This month, Russia's oil production quota was set to increase to 9.449 million barrels per day. However, the decline in production, while expected to be modest due to energy-hungry buyers in Asia continuing to demand Russian crude, could potentially force Russia to reduce its production further.
Transneft, a Russian oil company, has restricted oil companies' ability to store crude in its pipeline system. Transneft has warned producers it may have to accept less oil if its infrastructure is further damaged. Despite this, Transneft did not respond to a request for comment regarding these restrictions and warnings.
Key Baltic Sea ports Ust-Luga and Primorsk have been damaged in these attacks, impacting Russia's ability to export its crude. J.P. Morgan and Goldman Sachs, among U.S. banks, anticipate that outages in refineries and limited storage capacities will put additional pressure on production.
Ukrainian President Volodymyr Zelenskyy referred to these attacks as "the sanctions that work the fastest." At least ten Russian refineries have been hit by these attacks so far. The continued demand for Russian crude by energy-hungry buyers in Asia could mitigate the potential decline in Russian oil production.
However, Russia's lack of significant oil storage capacities could exacerbate the impact of the ongoing attacks on its energy facilities. Unlike leading OPEC producer Saudi Arabia, Russia does not have substantial oil storage capacities. This lack of storage could potentially force Russia to reduce oil production even further in the face of continued attacks.
These developments underscore the ongoing tension between Russia and Ukraine, and the far-reaching impacts these conflicts can have on global oil prices and supply.
Read also:
- Planned construction of enclosures within Görlitzer Park faces delays
- Foreign financial aid for German citizens residing abroad persists
- United States and Russia prepared to delve deeper into negotiations regarding the Sakhalin 1 oil and gas project
- Heavy-duty zero-emission vehicles may be exempted from tolls for how long, according to the commission's proposal.
