Russia’s oil output is expected to fall by 1.9 million barrels a day by February as an EU embargo on crude and refined petroleum product exports from Moscow takes effect, according to the International Energy Agency.
While the drop from pre-war production levels is smaller than the 3m b/d losses the IEA predicted in March, the forecast highlights the impact the EU ban could have, even if significant volumes are diverted to other markets.
Russia produced nearly 11 million b/d of oil and products in August, which was only marginally lower than its output before the February invasion of Ukraine, the Paris-based IEA said. It expects it to drop to 10.2 million b/d in December to 9.5 million b/d in February 2023.
Despite a 2m b/d drop in exports to Europe, the US, Japan and Korea since the invasion, the diversion of flows to India, China and Turkey has “mitigated upstream losses” for the Kremlin. Once the EU embargo takes effect, the IEA expects an additional 1.4 million b/d of oil and 1 million b/d of products to find a new home.
Although total Russian oil exports actually rose by 220,000 b/d in August, Moscow’s estimated export earnings fell by $1.2 billion to $17.7 billion due to lower oil prices worldwide, the IEA said.
The IEA’s latest Russian forecast came as the group, which advises OECD members on energy policy, cut its forecast for global oil demand for 2022 by about 110,000 b/d.
“Growth in global oil demand continues to decelerate” due to a slowdown in developed economies and the continued impact of the Covid-19 lockdown in China, the company said. However, a “major” shift from gas to oil for electricity generation due to record natural gas prices meant overall demand growth slowed only “marginally”, the IEA added.
Global oil demand is now forecast to rise by 2 million b/d to 99.7 million b/d in 2022. Next year, he expects demand to increase by another 2.1 million b/d, surpassing the pre-pandemic level to 101.8 million b/d.
By comparison, oil producer group Opec forecast demand growth of 3.1 million b/d in 2022 and 2.7 million b/d in 2023. On Tuesday, the cartel blamed the recent oil sell-off on “wrong signals” as it pointed to “ healthy” expected growth in demand until 2023.