Russian government draft lowers oil production outlook, could hit 17-year low in 2026

According to media reports citing a draft forecast from the Russian government, affected by the Russia-Ukraine conflict, Russia has lowered its 2026 oil production outlook to a 17-year low, while also cutting fuel export expectations for 2026-2027. The continued impact of the conflict on Russia's economy and energy infrastructure has become increasingly apparent. This forecast will be finalized at the end of September and serves as an important reference for Russia's national budget preparation. Compared with the May version of the forecast, the oil production expectations for 2026-2029 have all been lowered, with a reduction range of 16 to 20 million metric tons.

Across-the-board production forecast cuts, medium- and long-term recovery to previous levels remains difficult

Russia is the world's third-largest crude oil producer. Based on the baseline scenario of the draft forecast, Russia's crude oil production in 2026 will decrease by 17.2 million metric tons year-on-year, falling to 494.2 million metric tons, equivalent to 9.88 million barrels per day, the lowest level since 2009.

The draft forecast expects production to rebound to 500 million metric tons in 2027, but that is still 16 million metric tons lower than the previous forecast; although production will continue to recover in 2028 and 2029, it will still not reach the 2025 output level.

Russian Deputy Prime Minister Alexander Novak acknowledged in June that oil production would decline this year, at the time attributing the drop to unplanned refinery maintenance.

Dual pressures: Western sanctions plus frequent attacks on refining facilities

After the outbreak of the conflict in February 2022, the EU imposed an import ban on most Russian oil and oil products, directly impacting Russia's core source of fiscal revenue.

External attacks have continued to escalate. Recently, Ukraine has increased drone attacks on Russian domestic refineries, resulting in a contraction of fuel production and domestic gasoline supply shortages. Data shows that Ukrainian armed forces launched at least 21 attacks on Russian refineries in August, setting a monthly record for such attacks.

Export structure divergence: crude oil exports rise, refined product exports shrink sharply

Against the backdrop of damaged refining units, Russia has adjusted its export structure, exporting more crude oil directly, mainly flowing to markets such as India. The draft forecast shows that Russia's crude oil exports in 2026 are expected to reach 244.7 million metric tons, higher than the 230.8 million metric tons in 2025, an increase of 7.5 million metric tons compared to the previous forecast.

However, crude oil exports will enter a downward trajectory thereafter, falling to 232.5 million metric tons in 2027, and further declining to 216.6 million metric tons in 2028-2029.

To hedge against domestic fuel shortages, Russia has successively introduced export restrictions on gasoline and aviation kerosene, and further tightened diesel export bans. Affected by both policies and production capacity, fuel exports in 2026 are expected to decrease by 27.3 million metric tons year-on-year to 98.5 million metric tons, 24.1 million metric tons lower than the previous forecast.

Spillover to the global market: international diesel prices rise

Disrupted by the Middle East situation and Ukraine's continued attacks on Russian refineries, the global diesel supply pattern has tightened, and international diesel prices have risen to a four-month high.