Russia close to cutting oil production, Transneft begins warning producers - Reuters
Kyiv • UNN
Russian oil pipeline monopolist Transneft has warned producers of a possible reduction in oil production. This is due to drone attacks that have cut Russia's oil refining capacity by almost a fifth.
Russian oil pipeline monopolist Transneft has warned producers about a possible reduction in output after drone attacks on critical export ports and oil refineries, Reuters reported on Tuesday, citing three industry sources, writes UNN.
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Over the past decade, oil and gas revenues have accounted for between one-third and one-half of all federal budget revenues in Russia, making the sector the most important source of funding for the government.
As the publication notes, citing representatives of the Ukrainian military and sources in the Russian industry, drones have hit at least 10 oil refineries, reducing Russia's refining capacity by almost a fifth, and damaged leading ports on the Baltic Sea - Ust-Luga and Primorsk.
Russian authorities have not publicly commented on the extent of the damage or the impact on production and exports.
However, Transneft, which accounts for more than 80% of all oil produced in Russia, has in recent days limited the ability of oil companies to store oil in its pipeline system, two industry sources close to Russian oil companies told Reuters.
Transneft has also warned producers that it may have to accept less oil if its infrastructure sustains further damage, two sources said.
These attacks could eventually force Russia, which accounts for 9% of global oil production, to cut output, two sources and a third source familiar with the operations of oil pumping companies said.
Transneft did not respond to requests for comment.
Primorsk, it is noted, partially resumed operations on Saturday after the attack, although, according to two sources, it is not yet clear how long it will take to complete full repairs.
According to industry sources, Russia has already lost some oil export capacity after another drone attack on the oil terminal in Ust-Luga on the Baltic Sea in August.
"Russia's ability to increase oil production is now at risk due to limited storage capacity," said an analytical note from the American bank J.P. Morgan.
Refinery shutdowns, in turn, will also put pressure on production due to oil storage overload due to reduced refining volumes, writes Goldman Sachs.
Both banks said that production would fall only slightly, as Asian buyers are still interested in Russian oil.