Russian crude output is falling fast — and three forces are making it worse

Ukrainian drone strikes on refineries and export routes

Ukraine has doubled the pace of drone strikes on Russian refineries since the start of 2026 . By May 2026, virtually all major refineries in central Russia were forced to halt or scale back output . The attacks continued to intensify: 18 refineries were hit in July alone, including the country's largest, the Omsk refinery, driving Russian oil refining to its lowest level since 2002 — a 24-year low .

The Orsk refinery was hit in August and forced to shut completely. Repairs could take up to six months because key equipment is imported and sanctions block replacement parts . In May 2026, Russian crude output dropped approximately 5% year-on-year to 8.7 million bpd, 10% below target .

Ukraine's deep-strike campaign has also targeted storage facilities, tankers, and port infrastructure. In July 2026 alone, at least 30 Ukrainian attacks on oil infrastructure were recorded, including strikes on five large tankers, five port facilities, and two pipelines . The port of Novorossiysk, a key Black Sea export hub for Russian crude, has experienced disruptions that threaten seaborne export reliability .

Tightening Western sanctions

The EU, UK, US, and allies have progressively lowered the price cap on Russian crude and introduced additional restrictions. The EU's 18th sanctions package reduced the crude oil price cap to $47.60 per barrel effective September 2025, and a subsequent adjustment in early 2026 lowered it further to $44.10 per barrel . The US Senate passed the "Lindsey O Graham Sanctioning Russia and Iran Act of 2026" in August 2026, which sets up to 100% tariffs on nations importing Russian oil .

Sanctions have increased shipping and insurance costs for Russian oil by 10–20% per trip, reducing profitability and slowing exports to Asia . According to the Brookings Institution, the sanctions bite not by stopping exports but by making them less profitable: Russia pays significant sums to move its oil, with each trip costing 10–20% of the cargo's value .

Aging wells and shrinking spare capacity

Beyond the immediate disruptions, Russia faces a deeper structural problem. Rystad Energy highlights that aging, high-water-cut wells remain idle for longer, reducing effective spare capacity, while a lack of sizeable greenfield developments limits Russia's ability to offset declines from mature fields after 2027 .

Rystad estimates Russia's spare production capacity — defined as barrels that could return quickly if all constraints were lifted — at roughly 620,000 bpd in 2026, rising modestly to 700,000 bpd in 2027. Much of that capacity is tied to aging, high-water-cut wells shut in under OPEC+ quotas, not easily restarted .

Russian oil producers cut drilling in 2025 to the lowest level in three years — 29,140 km of production wells, down 3.4% from 2024 — as sanctions and weaker revenues squeezed investment . This underinvestment compounds natural field decline. In Russia's oil heartland of Khanty-Mansiysk in Western Siberia, which accounts for roughly 40% of the country's output, production has steadily declined since 2009, falling more than 13% from 2019 to 2024 .

Black Sea disruptions and global price impact

The available evidence confirms that Ukrainian drone strikes have targeted Black Sea port infrastructure, including Novorossiysk, a key export hub. June 2026 saw a 68% month-on-month increase in crude loadings at Novorossiysk, but this partly reflected rerouting from Baltic ports that had also been disrupted . However, the search results do not contain a directly citable source for a specific Brent price of $88.52 linked to Novorossiysk disruptions. The broader context — global supply tightening from multiple sources including the Hormuz Strait closure, Russian decline, and Iranian disruptions — has kept oil markets under pressure, with the IEA noting a deepening global supply shortfall in 2026 .

Outlook for Russia's leverage with remaining buyers

Russia's bargaining power with its remaining customers — primarily China and India — is weakening for several reasons:

• Dwindling output — Production is falling faster than Russia's own official forecasts. Russia's base case for 2026 was 10.22 million bpd (including condensate), but actual crude-only output is tracking well below that .
• A projected 2027 global surplus — The IEA sees global supply outstripping total demand by 4.61 million bpd in 2027, assuming geopolitical de-escalation . In a market swimming in oil, buyers like China and India can demand deeper discounts, and Russia loses pricing leverage.
• Sanctions-driven cost inflation — Higher shipping and compliance costs (10–20% surcharges) erode the effective price Russia receives, even if the headline sale price looks competitive .
• Structural decline is terminal — Rystad and Carnegie both project a long-term downward trend that Russia will struggle to reverse: without major new field development, output heads toward 8 million bpd by 2030 and lower .

In short, Russia is being squeezed on all sides — drone attacks degrade its ability to produce and refine; sanctions cut profitability and raise transaction costs; aging wells and underinvestment shrink its production base; and a looming global surplus in 2027 reduces whatever remaining pricing leverage it holds with its shrinking customer base.