Russia’s crude output fell to 8.962 million barrels a day in January, 16,000 barrels a day below its target under the OPEC+ supply agreement. Russia pledged to submit an updated schedule for oil production cuts to compensate for past overproduction, though none has been published. The country’s harsh winters and the geology of its oil fields can make it hard to cut output.

That said, Russian refineries are processing more crude oil in the hope of boosting fuel exports after the Biden administration imposed fresh sanctions on Russian crude. The sanctions targeted Surgutneftgas and Gazprom Neft, two Russian oil firms that handle 25% of Russian oil exports. The two companies shipped an average of 970,000 bbls a day in 2024. 

“We have to utilize oil processing as much as we can in order to use (the sanctioned) oil,” a Russian industry source said.

Middlemen who supply Russian oil have stopped offering cargoes after the latest U.S. sanctions imposed by the Biden administration targeting Russian producers, tankers and insurers, Bharat Petroleum CFO has revealed. Bharat Petroleum and other Indian state refiners buy Russian oil in the spot market, mainly from traders.

“We have not received any new offers for the March window (delivery). Traders are asking us to wait. We are waiting to get offers,” Vetsa Ramakrishna Gupta told Reuters on Wednesday.

“We are not expecting the similar number of cargoes that we used to get in the months of December and January,” he added.

Commodity experts at Standard Chartered have predicted that the strength in oil markets witnessed at the start of the new year is likely to persist, powered by, among other things, the removal of more Russian barrels from the market following sanctions. According to StanChart, the new restrictions roughly triple the number of directly sanctioned Russian crude oil tankers, enough to affect around 900,000 barrels per day (bpd). Whereas it’s highly likely that Russia will try to circumvent the sanctions by employing even more shadow fleet tankers and ship-to-ship transfers, StanChart sees 500,000 bpd of displacements over the next six months.

By Alex Kimani for Oilprice.com

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