Russia's oil output falls less than 3% as Western sanctions have ‘limited’ effect

The International Energy Agency (IEA) has recently discovered that since the invasion of Ukraine, Russian oil production has decreased by less than 3%, with a broad range of western energy restrictions having only a "limited" impact. According to the IEA's most recent monthly oil report, Russia's oil output in the month of July was 310,000 barrels per day below prewar levels, while overall oil exports fell by around 580,000 barrels per day. The report stated that Russia earned $21 billion in June and $19 billion from oil exports last month.  

According to The Guardian report, the IEA’s report said, “The outlook for world oil supply has been revised upward, with more limited declines in Russian supply than previously forecast.” 

Since the commencement of Russia's brutal aggression against Ukraine in February, Moscow's crude and oil product exports to Europe, the United States, Japan, and Korea have reduced by almost 2.2 million barrels per day. However, the IEA reported that the rerouting of flows to countries like India, China, Turkey, and others, along with "seasonally higher Russian domestic demand," has reduced upstream losses. Further, China became the largest buyer of Russian crude in June, surpassing the European Union. 

EU's ban on importing Russian oil would take full effect in February 2023

In addition to this, the IEA noted that the EU's ban on importing Russian oil and goods, which would take full effect in February 2023, could cause "further declines" as around 1.3 million barrels per day of crude and 1 million barrels per day of products "would have to find new homes." After the bloc's sanctions would enter into force, Russia is anticipated to reduce output, which would benefit oil giants like Saudi Arabia from the increase in European oil demand, according to the IEA. 

Furthermore, the IEA has increased its projections for global oil demand growth in 2022 by 380,000 barrels per day, to 2.1m barrels per day, citing rising natural gas and power costs as "incentivising gas-to-oil switching in some countries," The Guardian reported.  

According to the report, EU nations have agreed to cut their gas use by 15% between August 2022 and March 2023. For the following six quarters, IEA predicts a rise in oil consumption of about 300,000 barrels per day. 

Meanwhile, on August 9, a spokesperson of the Russian oil business Transneft said that Ukraine had ceased supplying Slovakia, the Czech Republic, and Hungary with Russian oil through the southern section of the Druzhba pipeline. Igor Demin, a representative for the Russian oil business, was cited by Interfax as saying that the oil transit was halted on August 4. 

(Image: AP)