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Russia’s Transneft Warns of Potential Oil Output Cuts After Ukrainian Drone Strikes
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Russia’s state-owned oil pipeline monopoly, Transneft, has warned oil producers that they may need to scale back output following a series of Ukrainian drone attacks on critical export ports and refineries, according to a Reuters report on September 16.
These attacks have targeted Russian energy assets in a strategic effort to weaken Moscow’s war effort and reduce its revenue stream from oil and gas exports.
Since August, Ukraine has intensified its strikes on Russian oil infrastructure, aiming to disrupt the Kremlin’s finances and the ongoing war in Ukraine. Oil and gas revenues, which have historically accounted for a significant portion of Russia’s federal budget, remain a crucial source of government funding, Reuters writes.
The attacks have damaged at least 10 of Russia’s refineries, reducing the country’s refining capacity by nearly 20%. Major Baltic Sea oil ports, such as Ust-Luga and Primorsk, have also been impacted. Despite this, Russian authorities have not publicly disclosed the full extent of the damage or its impact on production and exports.
Transneft, which manages over 80% of Russia’s oil transport, has recently restricted oil storage within its pipeline system and warned producers that it may not be able to accept full oil deliveries if its infrastructure continues to be damaged.
Industry sources told Reuters that if the damage persists, Russia may have no choice but to cut oil production, which would affect the country’s standing as the world’s third-largest oil exporter.
The Ukrainian drone strikes are seen by some as “the fastest working sanctions” against Russia, with Ukrainian President Volodymyr Zelenskyy emphasizing their impact on Russian oil infrastructure as a significant blow.
Despite these efforts, Russia has managed to reroute most of its oil exports to Asian markets, with China and India being primary buyers.
One of the most significant targets was the Primorsk port, Russia’s largest oil export hub, which was hit by Ukrainian drones last week. Primorsk has the capacity to export over 1 million barrels of oil per day, representing more than 10% of Russia’s total output.
Although operations were temporarily halted, the port partially resumed on September 13, though full repairs are still pending.
In addition, the Ust-Luga terminal, another vital export point, was targeted in a drone attack in August, further straining Russia’s oil export capacity, Reuters reports.
“Russia’s ability to ramp up oil production is now under threat due to limited storage capacity,” US bank J.P. Morgan told Reuters.
Limited storage capacity and refinery outages are expected to impact production, as crude oil storage becomes congested from reduced refinery runs. However, analysts, including those from J.P. Morgan and Goldman Sachs, project only a modest decline in Russia’s oil output, citing continued demand from Asian markets for Russian crude.
According to the latest OPEC+ agreement, Russia’s oil production quota is set to increase slightly to 9.449 million barrels per day in September, up from 9.344 million bpd in August. However, unlike leading OPEC producer Saudi Arabia, Russia lacks significant capacity to stockpile oil, Reuters reported.
Previously, US President Donald Trump had signaled growing frustration with Russian leader Vladimir Putin, suggesting that new, harsher sanctions on Russia are imminent.
