Russian oil production could drop 18% by 2023 as the EU imposes a ban on all seaborne imports, the EIA says
- Russian oil production could slip 18% by the end of next year, according to the EIA.
- The forecast comes in response to an EU ban on all Russian seaborne crude imports.
Russia's oil output could fall by almost one-fifth by the end of next year, once Europe imposes a proposed ban on imports in retaliation for the war in Ukraine, the US Energy Information Administration (EIA) said in its monthly report on Tuesday.
The EU is planning to ban all Russian seaborne crude imports as it ramps up pressure on Moscow over the invasion of Ukraine.
Assuming the EU ban on Russian seaborne trade and petroleum product imports will be imposed in six months and eight months respectively, the EIA expects Russian oil production to fall around 18% from 11.3 million barrels a day to 9.3 million barrels a day by the end of next year.
"The possibility that these sanctions or other potential future sanctions reduce Russia's oil production by more than expected creates upward risks for crude oil prices during the forecast period," the EIA said.
Russia exports around 7 million barrels a day of crude and around half of that amount arrives in the EU in a combination of pipelines and oil tankers.
Excluding the pandemic-induced drop in Russian oil output in 2020, the anticipated decline would effectively wipe out about 18 years' worth of production gains.
Since Russia's invasion of Ukraine, its oil production has been significantly impacted as Western nations imposed a series of harsh sanctions and many commodity traders voluntarily avoided its energy exports. Russia is part of the so-called OPEC+ group of exporters that in 2020 agreed to jointly restrain production to prop up world prices. The group has since gradually increased output in response to improving demand, but Russia may no longer be in a position to do so.
With fewer buyers of its oil, Russia has been forced to sell its crude at a discount to Asia specifically, resulting in smaller profits. According to Bloomberg, the total revenue from oil exports between April and May fell by $9 million, or about 5%, as Brent crude, the international benchmark, rose 15% in value to $120 a barrel.
Data showed export duty rates slipped about 10% from $8.30 a barrel in April to $6.81 a barrel in May.