The latest announcement from OPEC+ keeping temporary oil production cuts in place through December 2023 is not what it seems. Most news reporting on the cuts has focused on potential Saudi and Russian collusion against the United States as the motivating factor behind the decision. While there may be plenty of friction between said countries, the real story is much more sublime.
Russian oil production cuts are not voluntary – they are the result of factors related to Western sanctions in retaliation for Russia’s aggression against Ukraine in the Black Sea war. Major oil companies and several oil service companies either curtailed operations in Russia or pulled out completely after Russia’s February 2022 invasion of Ukraine. The abandonment of assets by highly experienced and efficient oil companies left some Russian oilfields to be run by less experienced entities. Over time, normal maintenance and repairs that needed to occur have not been as robust under Russian control as they were under multinational oil and oil service companies’ control. It is only natural, and not at all unexpected, that Russian oil production would fall under such circumstances. Additionally, Western sanctions and embargoes on equipement, spare parts, and technology are pressuring the Russian oil sector even further, creating more of a strain on Russian oil production capabilities.
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