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Russia will find it harder to maintain oil production, says IEA chief

  • Russian oil production will take a hit as Western sanctions take effect, the IEA chief said.
  • The loss of Europe as a buyer and the erosion of confidence in Russia as an energy supplier will please, he said.
  • Russia’s central bank shared similar sentiments, saying the new output targets were too optimistic.

Russia’s unexpectedly buoyant oil production could soon face problems as Western sanctions start to hurt, the head of the International Energy Agency has said.

“In absence of [Western] companies, in the absence of technology providers, in the absence of service companies, it will be much more difficult for Russia to maintain production,” said IEA Executive Director Fatih Birol. told Reuters.

Russia’s oil production has so far remained stronger than expected since the country invaded Ukraine in February. the IEA said in its August market report, Russia produced 9.8 million barrels of oil per day in July, marking an increase over production figures for May and June.

The production increase in Russia came amid a boom in domestic demand for motor and jet fuel over the summer. Thanks to international sanctions on Russian airlines, many citizens were unable to go on vacation abroad, which meant more internal travel.

At the same time, high demand for cheap Russian oil from countries including India, China and Turkey has meant the energy-rich country has also boosted production.

However, Birol said such strong output is unlikely to be sustained as countries around the world lose confidence in Russia as an energy supplier after its invasion of Ukraine and gas cuts.

“Russia is not winning the energy battle here,” he said.

The loss of Europe as a buyer of Russian energy will also hurt Moscow, he continued. European leaders agreed in May on a ban on Russian oil that will cut 90% of EU imports by the end of the year.

Birol’s pessimism about Russia’s oil production echoes comments from Russia’s central bank, which said the new oil production targets proposed by the Finance Ministry are too optimistic. Central bankers anticipate that the nation will most likely fall short of the price and production targets envisioned in its new draft budget.

That matches recent forecasts from Rystad Energy, which predicted that Russian oil production could Drop in more than a million barrels per day. as summer demand winds down to the fall season, and Asian importers lose appetite for Russian crude over cheaper prices elsewhere.

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