iMetal

A million down. A million up. A million down, again.
This roughly describes the rollercoaster ride in oil production that Russia is expected to see fully play out in the coming months, according to a new forecast from Rystad Energy.
Despite showing a measurable degree of resilience since sanctions began hitting a few months ago, the Oslo-based market research group said this week that “the worst is yet to come” for the Russian oil industry.
Rystad's analysis shows that Russia likely saw production drop by as much as 1 million B/D in April before making an almost complete rebound by July as crude output neared pre-war levels. Rystad said this “outstanding growth” was largely the result of increased refinery throughput as exports topped out at 5 million B/D April and May before retreating to 4.2 million B/D last month.
These figures led Rystad to increase its outlook for Russia’s average production this year by 200,000 B/D to 9.6 million B/D. However, the impressive comeback may be short lived.
As summer concludes in Russia, Rystad expects crude production will drop once again by as much as 1.1 million B/D and that a “further recovery will be more challenging and will take more time.”
Another looming cloud are the sanctions approved in May by the European Union (EU) that target about 90% of the 22-member states’ combined imports of Russian oil and gas products. Seaborne oil and gas products were immediately banned with notable exceptions including pipeline imports to Germany and Poland that are scheduled to be phased into the embargo in December.
Rystad does not consider it likely that compliance with the EU embargo will be total during the start of 2023. But it does project that EU imports of Russian crude will drop to 600,000 B/D by December. Before its invasion of Ukraine 6 months ago, Russia was supplying the EU with an average of 3 million B/D. Rystad noted that with the deadline to comply with the embargo approaching, Russian exports to the EU were slightly up last month.