Save for later Print Download Share LinkedIn Twitter The US' immediate ban on Russian energy imports, coming on top of the growing self-sanctioning by European and Asian buyers who are shunning Russian barrels, might leave Moscow with no choice but to cut crude oil production in the months ahead.The cuts could be bigger than Russia had to bear under the megadeal of the Opec-plus group in April 2020 to tackle the demand destruction caused by the Covid-19 pandemic. Then, Russia had to slash production by more than 2 million barrels per day.If hurdles with oil exports continue, then in addition to the 3 million b/d of crude and refined products that Russia has already failed to ship to global markets, a drop of another 2 million b/d could be in store over the next couple of weeks, Energy Intelligence estimates. With the lack of storage capacity, Russian production might drop by 3.2 million–4 million b/d already in April under various scenarios, according to the Oxford Institute for Energy Studies.Sailings Hit RocksRussian crude exports have fallen by some 1.6 million b/d in March from about 4.7 million b/d in February, because of complications with seaborne sales, Energy Intelligence estimates. As of Mar. 8, at Russia's Baltic ports, there were no vessels chartered from Primorsk and just four from Ust-Luga. Half of those volumes are Kazakh barrels being lifted under an offtake deal with Vitol.Shipments so far remain steady via the 1 million b/d Druzhba pipeline to landlocked refineries in Central and Eastern Europe. Market insiders say that the March export program for Druzhba, which was penciled in at 753,890 b/d, will be fully fulfilled. But there are already doubts over the April allocations, which sellers and buyers should start agreeing on in a week's time. Druzhba shipments have their own rules and are mostly carried out under annual contracts, but payment constraints and other sanctions-related issues look set to further complicate matters, insiders say.Although there is no official ban on purchases of Russian oil — except by the US — banks still refuse to open letters of credit, while sellers that were ready to use open credits or pre-payment for crude oil sales still face problems with cash settlements. "There is a feeling that there might be an informal ban on all transactions with Russia," one market player said.Adding to exporters' headaches, Shell and BP have announced they would stop buying Russian oil and gas. Freight and insurance problems made sellers and buyers discuss switching from the usual f.o.b. basis that usually applies to Russian oil exports, to c.i.f. or d.e.s., under which the seller is responsible for shipment. However, not much progress has been made as the lack of vessels or transaction problems are still there. On one positive note, port data showed that volumes are still being lifted by Chinese buyers and that crude cargoes are still moving in and out of the Russian port of Kozmino in the Far East. But there have been signs that even Chinese buyers were losing their appetite for Espo barrels shipped from Kozmino.Majors DisconnectIf Russian producers are forced to cut their output, the market management experience they gained from cooperating with Opec-plus will be helpful. Short-term reductions could have a minimal impact, but longer-term plans could be influenced by the limited access to Western technology and expertise following the withdrawal of international majors from Russia. Reports indicate, for example, that production at the Sakhalin-1 project on the Russian Pacific Shelf — in which Exxon holds a 30% stake and the operatorship — has started to fall as wells are mothballed following the US supermajor's decision to disconnect from the venture. Russian crude production — excluding condensate — was already 10,000 b/d down in February from the previous month. According to energy ministry data, it dropped to 10.047 million b/d (38.91 million metric tons) from 10.057 million b/d in January.Under the Opec-plus agreement, Russia was allowed to produce 10.227 million b/d of crude last month, while its March quota was set at 10.331 million b/d.Russia’s combined production of crude oil and gas condensate stood at 11.04 million b/d (42.23 million tons) in February, some 26,500 b/d higher than in January.