Oil & Gas News

Russia Will Have to Shut-In Oil Production

Russia, Kremlin Senate

By: Andreas Exarheas – RigZone – Russia will have to shut-in oil production as it will be unable to sell all the oil displaced from European markets in other regions.

That’s what Standard Chartered analysts expect, according to a new report from the company, which was sent to Rigzone late Wednesday.

“We expect continuing consumer reluctance to buy from Russia and shortages of capital, equipment, and technology to continue to depress Russian output over at least the next three years,” the analysts stated in the report.

“We expect output to fall by 1.612 million barrels per day year on year in 2022, and by a further 0.217 million barrels per day in 2023, with the year on year decline peaking at 2.306 million barrels per day in Q2-2022,” the analysts added.

In the report, the analysts noted that Russia’s difficulty in marketing its oil opens up a significant supply deficit in Standard Chartered’s model.

“Given the market is starting with very low inventories, we think rebalancing would require around two million barrels per day extra supply for the remainder of 2022, and an additional two million barrels per day in Q2 to ease the dislocations caused by the displacement of Russian oil,” the analysts stated in the report.

“An Iran deal could provide an extra 1.2 million barrels per day in H2-2022, still leaving a significant gap that can only be realistically filled by those OPEC members with spare capacity, particularly Saudi Arabia and the UAE,” the analysts added.

“We expect OPEC to respond to the potential supply gap, effectively ending the OPEC+ agreement in its current form,” the analysts continued.

According to BP’s latest statistical review of the world energy report, Russia produced 10.66 million barrels per day in 2020. This marked the first drop after several years of consecutive production increases, according to the report, which highlighted that the country produced 11.66 million barrels per day in 2019.

The report outlined that the only countries that produced more oil than Russia in 2020 were the U.S., with 16.47 million barrels per day, and Saudi Arabia, with 11.03 million barrels per day.

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