Russia's Oil Output Slips Further Below OPEC+ Targets

Russia's crude oil production has continued to decline, falling further below its OPEC+ production targets. According to the Russian Energy Ministry, output in July was 67,000 barrels per day (bpd) above its quota, but this was a decrease from June levels. The ministry attributed this decline to "one-off supply scheduling issues" and stated that August and September production levels would "remedy this."

Russia has been struggling to meet its OPEC+ production targets due to a combination of factors, including sanctions, reduced demand from Western countries, discounted prices, limited access to markets, and limited access to foreign technologies and expertise. These challenges have led to a significant reduction in Russia's oil exports and revenue from oil sales.



The decline in Russian oil production has significant implications for the global oil supply-demand balance and international oil prices. Russia is the world's third-largest oil producer and the largest exporter of oil to global markets. A decline in Russian production has led to a reduction in global oil supply, tightening the market and putting upward pressure on prices. For instance, in February 2022, following Russia's invasion of Ukraine, oil prices surged by USD 8/bbl to USD 105/bbl on expectations of sanctions against Russia crippling energy exports.

The decline in Russian production, combined with increased demand and geopolitical tensions, has the potential to drive international oil prices higher. For instance, in 2022, the average Brent crude oil price was around USD 100/bbl, significantly higher than the USD 65/bbl average in 2021. This increase in prices has implications for consumers, particularly in countries that rely heavily on oil imports, as it increases their energy costs and can slow economic growth.

In conclusion, Russia's inability to meet its OPEC+ production targets is primarily due to sanctions, reduced demand from Western countries, discounted prices, limited access to markets, and limited access to foreign technologies and expertise. These factors are likely to evolve in the near to medium term, making it more difficult for Russia to meet its production targets. The decline in Russian production has significant implications for the global oil supply-demand balance and international oil prices, with the potential to drive prices higher and impact consumers worldwide.