How Real is Russia’s Oil Production Cut?
Russian production likely fell in March by the most since April 2022, but estimates differ greatly between sources and Moscow’s gaslighting only serves to further stir the pot of uncertainty
Become a paid subscriber today to view this full report on Russia’s production cut and the range of estimates underpinning current tracking efforts—join me in my hunt for ever-deeper oil & gas market context.
If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.
Russian production likely declined in March by the most since April 2022, but estimates of the pullback’s magnitude vary considerably.
The market has grown justifiably skeptical toward assumptions of chronically elusive Russian production declines, and the widening production estimate dispersion stokes further uncertainty.
Furthermore, high-frequency tanker export and domestic refining data have yet to confirm any material output change, though these will likely lag and may shift over the coming weeks.
In this environment it’s critical to be aware of the full breadth of estimates currently rattling around the market to parameterize the extent of Russian production uncertainty.
How much oil is Russia actually producing under current conditions? Russian crude output has been, arguably, the most-watched oil market statistic since Moscow’s invasion of Ukraine over a year ago. But despite this attention, the flow of fresh Russian barrels continues to be a uniquely opaque and oft-debated line item in global balance models. There is a complete lack of timely, granular, and trustworthy data from Russian government statistics, which typically forms the benchmark against which other estimates are compared and trued up over time—and, as a result, we’re beginning to see a growing disparity between Russian production estimates published by analysts and those quoted in the media.
The uncertainty around production estimates is then magnified by Moscow’s gaslighting of its current production performance and the underlying cause of its latest cuts. The 500 kbpd cut announced by the Kremlin in February and effective in March has been “justified” as many things, including 1) retaliatory against western sanctions, 2) reflective of the lagged impact of the sanctions on Russia’s capacity to market crude, 3) relatedly, a direct way of narrowing the steep Urals differential, and now 4) part of a broader OPEC+ “voluntary” cut.
And the stakes here are massive: even tiny proportional (i.e., %) deviations between production estimates can yield differences amounting to 100s of thousands of daily crude barrels given the colossal scale of the Russian oil industry (on par with Saudi Arabia and the United States). While this problem hasn’t been particularly pronounced over the past 4-5 months of reasonably stable production, it does become a big problem when the production trajectory changes. All of the major firms and agencies that report monthly, publicly-available Russian production estimates have indicated that production pulled back in March, likely in the 250 kbpd m/m range but with some estimates as low as 100 kbpd and some as high—admittedly from a self-interested Kremlin—as 700 kbpd. That range is easily enough to mean the difference between over- vs. under-supplied market balances.
So, let’s more carefully consider the reasonable range of Russia’s recent crude oil output with the objective of providing context for interpreting whatever haphazardly referenced data hits headlines next.