Ukraine attacks make Russian oil output cuts inevitable, Reuters says
Illustrative photo: oil production in Russia will be reduced (Getty Images)
Large-scale Ukrainian attacks on Russia’s oil infrastructure have led to the overflow of the country’s storage system. This makes oil production cuts in Russia inevitable, Reuters reports.
Paralysis of export capacity
According to industry sources cited by the outlet, Ukrainian drone strikes on ports, refineries, and pipelines have reduced Russia’s export capacity by 1 million barrels per day.
Reuters sources note that around one-fifth (20%) of Russia’s total export capacity is currently out of operation. The Baltic ports of Ust-Luga and Primorsk were hit the hardest. Ust-Luga halted oil exports a week ago following a series of fires caused by drone attacks.
The system is on the brink of collapse
Due to the inability to ship oil from the port of Ust-Luga and process it at domestic refineries, Russia’s oil pipeline system has become overloaded.
At the same time, sources say storage facilities in Russia are rapidly filling up. This means that some oil fields will be forced to cut production.
Impact on Russia’s budget
Although global oil prices have risen following attacks on Iran in late February, a reduction in physical sales volumes will be a painful blow for Russia. Oil and gas revenues account for about a quarter of the country’s state budget.
In addition, the situation in Russia is deepening the global supply shortage, already strained by conflicts in the Middle East.
Strikes on Russian ports
In recent days, Ukraine has carried out a series of attacks on oil terminals in the Russian ports of Ust-Luga and Primorsk.
Yesterday, April 2, it became known that Russian oil exports through these ports had been halted.
At the same time, industry experts note that Russia is losing more than $70 million per day due to these attacks by Ukrainian forces.
