Will Russia Finally Show Signs Of Production Loss?

At HFI Research, we are data-dependent. We learned that the hard way in 2018 when we ignored Saudi's threat to increase oil production in the second half of the year and our performance paid dearly. 

So as the Russian invasion of Ukraine was underway in March 2022, we were skeptical that Russia would see any production loss. At the time, IEA had published a report detailing how Russia would lose ~3 million b/d by this summer. The US responded with other OECD countries to release SPR in order to combat this potential supply drop.

But as we wrote at the time, always fade the IEA, and Russia's crude exports actually rose over the next 2-months.

Since then, things have changed. Europe has formally announced that they will be banning Russian crude imports by year-end. Trading houses have not renewed trading contracts, and the growing logistical constraints of transporting Russian crude to India and China are starting to show in the data.

Even if we assume that India and China buy all of Russia's crude, the tanker transport time will make it logistically difficult, which in turn, will lower the "maximum" capacity Russia can export.