Ukraine strikes reduce Russia's oil production forecast

Ukraine's sustained drone attacks targeting Russia's deep oil production territories are impacting the nation's output, according to a monthly report from the Paris-based International Energy Agency (IEA).

The IEA has revised its forecast for Russia's oil production downwards by 200,000 barrels per day for the current year, now estimating it at 8.95 million barrels daily. These strikes on oil and gas facilities aim to hit a crucial source of revenue for Russia's war economy. The frequency of such attacks has doubled since the beginning of the year, leading to disruptions in refining operations.

Russia recently acknowledged a decrease in its oil production for the year, attributing it to unscheduled repair work. The country had ceased publishing oil production data in April 2023, more than a year after its invasion of Ukraine. Despite these production challenges, Russia's oil exports remained relatively stable in May, averaging around 7.4 million barrels per day, consistent with the previous year.

However, revenue from oil exports saw a decline of $710 million compared to the previous month, falling to $20.8 billion, largely due to decreased prices. Nevertheless, this figure remains 65% higher than the previous year, a situation partly influenced by elevated prices stemming from the conflict in Iran. Ukraine's attacks have reportedly compelled Moscow to prioritize supplying its domestic market with oil products while maximizing crude oil exports.

Exports increased by 490,000 barrels per day to 5.2 million barrels, returning to 2022 levels. In response to potential fuel shortages, Russia plans to reduce crude oil exports in June and accelerate operations at its refineries. The government has recently banned the export of aviation fuel until November 30 and restricted gasoline exports.