Russian oil production is expected to weaken over the next two years after the International Energy Agency revised its outlook in response to repeated Ukrainian drone strikes on Russia's energy infrastructure. At the same time, renewed instability in the Middle East continues to cloud the outlook for global oil supply, with further downside risks unless regional tensions ease quickly.
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Russian oil production outlook revised lower by the IEA
The global energy market is continuing to absorb the consequences of geopolitical conflicts. In its July Oil Market Report, the International Energy Agency (IEA) lowered its forecasts for Russian oil production in both 2026 and 2027, citing the growing impact of repeated Ukrainian drone attacks on Russian energy infrastructure. The strikes are increasingly disrupting Moscow’s refining capacity and are expected to weigh on crude output over the coming years.
The decline in Russian supply is only one element of a far broader picture. Escalating tensions in the Middle East, persistent uncertainty surrounding the Strait of Hormuz and lower global refining activity are all contributing to an increasingly fragile balance between worldwide oil supply and demand.
Russian oil production hit by attacks on energy infrastructure
According to the IEA’s July report, Ukraine has intensified drone strikes against Russian energy facilities in recent months, targeting oil refineries and other strategic assets in an effort to weaken Moscow’s industrial and energy capabilities.
The continued attacks on refineries, storage facilities and transport infrastructure prompted the agency to revise its production outlook downward. As a result, the IEA reduced its estimate of Russian oil supply by 85,000 barrels per day for this year and by 150,000 barrels per day for next year.
The agency now expects Russian oil production, from the world’s third-largest oil producer, to average 8.9 million barrels per day in 2026 and 8.8 million barrels per day in 2027, compared with 9.2 million barrels per day recorded in 2025.
Despite the weaker outlook, Russia’s crude production increased by 120,000 barrels per day in June compared with May, reaching 8.86 million barrels per day. However, this remained around 900,000 barrels per day below the production target allocated under the OPEC+ agreement.
The IEA estimates that Russia’s total crude exports rose to 5.8 million barrels per day in June, an increase of 620,000 barrels per day from the previous month. By contrast, exports of refined petroleum products declined by 230,000 barrels per day, falling to 1.91 million barrels per day.
Adding further pressure to domestic fuel markets, Russia this week introduced a ban on diesel exports, complementing the restrictions already in place on gasoline and jet fuel exports in an effort to address fuel shortages at home.
Middle East tensions continue to threaten global oil supply
Beyond Russia, the report highlights the risks associated with renewed hostilities in the Middle East. The latest escalation between the United States and Iran could significantly alter the IEA’s previous expectation of a sizeable oil market surplus next year.
Global oil supply recovered in June following the reopening of the Strait of Hormuz, but production remained well below the levels recorded before the conflict.
According to the July report, global oil supply rebounded by 4.1 million barrels per day (mb/d) in June, reaching 98.8 mb/d, supported by the partial resumption of shipping through the Strait of Hormuz, which allowed Gulf producers to restore part of their output.
Even so, worldwide production remained approximately 9.4 mb/d below pre-conflict levels.
The IEA forecasts average global oil supply to decline by 3.7 mb/d, reaching 102.6 mb/d in 2026, provided that a rapid de-escalation takes place across the region. Should tensions persist, the impact on global supply would be considerably greater. Conversely, if shipping volumes continue to recover, the agency estimates that oil supply could increase by 7.5 mb/d next year.
Russian oil production and weaker refining activity reshape market outlook
The report also notes that global refining activity increased by 1.5 mb/d in June but remained 6 mb/d lower than a year earlier. Export-oriented refineries in the Middle East have yet to resume full operations, Russian processing volumes remain constrained by drone attacks, and Asian refineries continue to operate below capacity.
The IEA expects global refining throughput to decline by 2.4 mb/d this year before recovering by 3.1 mb/d in 2027, assuming geopolitical conditions improve.
