Russia may soon be forced to reduce its oil production due to the combined effects of US sanctions, which have restricted access to tankers, and increased Ukrainian drone attacks on refineries.
In response to the sanctions, the US targeted 180 Russian tankers last month, while Ukraine intensified its drone strikes to enhance its leverage in negotiations. These developments are seen as a challenge to Russian oil output, which could fall below 9 million barrels per day in the coming months. The reduction is being driven by a growing surplus of crude oil and limited refining capacity.
Further complicating matters, the sanctions have led to a severe reduction in the availability of tankers for Russian oil exports. In January, the cost of transporting crude from Russia to China skyrocketed, and a significant portion of Russia’s tanker fleet has been sidelined, contributing to an increasing volume of oil stored at sea. Analysts predict that the amount of stranded oil could grow to 50 million barrels in the first half of 2025.
The sanctions have also forced Russia to seek smaller vessels, leading to a surge in the prices of tankers. As a result, the cost of shipping oil to China has significantly increased, adding additional strain on Russia’s already struggling oil industry.
In addition to sanctions, drone attacks on Russian refineries have taken out about 10% of refining capacity, further exacerbating the situation. Key sites have been forced to shut down fuel production, and restoration could take weeks or even months.
Despite the difficulties, Russia has continued to adapt by purchasing smaller Aframax tankers to address the shortage. However, the cost of operating these tankers has risen substantially, and Russia’s oil income has been significantly impacted.
With OPEC+ already reducing production to stabilize oil prices, Russia’s options are becoming increasingly limited, especially with a growing budget deficit resulting from the war. This combination of factors may force Russia to reconsider its oil output levels in the near future.
