Russia will likely manage to keep its oil production around the levels from before the Russian invasion of Ukraine, thanks to solid demand for Russia’s crude oil in India and China, JPMorgan said on Thursday.
“We believe Russia will be able to maintain its oil production at pre-war levels of 10.8 mbd (million barrels a day) but will have difficulties getting back to peak pre-COVID volumes of 11.3 mbd,” Reuters quoted the Wall Street bank as saying.
Still, Russia could struggle to divert part of its oil product exports away from Europe, after the EU embargo on imports of Russian fuels came into effect on February 5, according to JPMorgan.
Seaborne oil product shipments from Russia are set to decline by around 300,000 barrels per day (bpd) to “lows last seen in May 2022,” the bank said.
Before the embargo, Europe was a key destination for Russia’s fuel exports and took in more than 600,000 bpd of Russian oil products.
This month, Russia is voluntarily cutting its oil production by 500,000 bpd as a result of the Western sanctions and the price cap on Russian crude oil.
The Russian production cut could be “a sign that Moscow may be struggling to place all of its barrels,” or “may be an attempt to shore up oil prices,” the International Energy Agency (IEA) said in its Oil Market Report for February.
The attempt at an oil-price boost has failed so far—prices have been pressured in recent weeks by signs that the Fed could raise interest rates to a higher endpoint and hold them there for longer to fight sticky inflation.
Russian crude oil and petroleum product exports held strong in February, with oil producers managing to export 7.32 million bpd of crude oil and oil products in February, according to Kpler data.