Goldman Sachs: Ukraine Ceasefire Unlikely to Boost Russia's Oil Output

Goldman Sachs Research has released a report suggesting that a potential Ukraine-Russia peace deal and associated easing in sanctions on Russia is unlikely to significantly raise Russia's oil flows. The investment bank believes that Russia's crude oil production is constrained by its OPEC+ 9 million barrels per day (bpd) production target rather than current sanctions, which are affecting the destination but not the volume of oil exports.



The report highlights that Russia's crude oil production has been relatively resilient despite sanctions, with the International Energy Agency (IEA) revising its forecasts to acknowledge Russia's ability to maintain output. In February 2023, the IEA stated that Russia's crude oil production had risen by 100,000 bpd in January, hitting 9.2 million bpd, despite facing Western sanctions. This increase in production underscores Russia's ability to find workarounds and maintain its oil output, which aligns with Goldman Sachs' assessment that Russia's production is constrained by its OPEC+ target rather than sanctions.

Moreover, the U.S. Energy Information Administration (EIA) in its Short-Term Energy Outlook (STEO) for November 2023, acknowledges that Russia's liquid fuels production has been more robust than expected since the invasion, averaging 10.8 million b/d since March 2022. The EIA also notes that Russia has adapted and shifted trade flows, with Russia increasingly exporting its liquid fuels to different markets, primarily by sea. This adaptation and resilience in Russia's oil production further support Goldman Sachs' assessment that Russia's production is constrained by its OPEC+ target rather than sanctions.



In conclusion, Goldman Sachs Research's report suggests that a potential Ukraine-Russia peace deal and associated easing in sanctions on Russia is unlikely to significantly raise Russia's oil flows. The investment bank believes that Russia's crude oil production is constrained by its OPEC+ 9 million bpd production target rather than current sanctions, which are affecting the destination but not the volume of oil exports. This assessment aligns with other market analysts' views, as they both acknowledge Russia's ability to maintain oil output despite sanctions and highlight the resilience of Russia's oil production.