Inevitable Oil Production Cuts in Russia Due to Ukrainian Attacks

The reduction of oil production in Russia has become an unavoidable consequence of Ukrainian attacks on port infrastructure, pipelines, and refineries. These actions have led to a decrease in the Russian Federation's export capabilities by 1 million barrels per day, which accounts for one-fifth of the total production capacity.

As of today, at least 20% of Russia's total export capacity is not operational. Although this figure is significantly lower than the peak of 40% in March, according to three industry sources, it is still sufficient to substantially impact Russian oil production, which ranks third in the world after the United States and Saudi Arabia.

The main Russian Baltic port of Ust-Luga suspended oil exports a week ago following Ukrainian drone attacks that caused fires at the port. According to Reuters sources, Ukrainian drones are targeting both export infrastructure and oil refineries in Russia, leading to congestion in the Russian pipeline system and storage facilities.

This situation is forcing some oil fields to reduce production to avoid further congestion in the system, as reported by Reuters. "Even before the Ukrainian attacks on the Baltic ports, Russia's export capacities were limited, as operations on the Druzhba pipeline, which supplies Russian oil to Hungary and Slovakia, were halted since January," the publication noted.

Last year, Russian oil production fell only by 0.8% to 10.28 million barrels per day, accounting for about one-tenth of global output, despite Western sanctions and Ukrainian drone strikes on refineries.

As previously reported, the devastating strikes by Ukrainian drones on key Russian ports have led to a drop in oil shipments from the aggressor country to the lowest level in over a year, significantly undermining the financing of the Kremlin's military expenditures.

Repeated attacks on oil export terminals in Primorsk and Ust-Luga caused fires in storage tanks and halted loading operations for much of last week. This reduced flows through these ports to approximately one-third of the previous week's levels and decreased Moscow's oil revenues by over $1 billion, according to Bloomberg.