Contrary to market fears of forced production cuts, Russia's recent drilling slowdown is not a sign of structural decline. It reflects a temporary redirection of capital expenditure towards refinery repairs following drone attacks, while overall drilling activity remains at historically high levels.
Analysts pointing to low OECD oil inventories are using an outdated five-year average. Permanent refinery closures since 2020 have structurally reduced inventory needs, meaning current stock levels are actually sufficient for the smaller refining base and are not a bullish signal for prices.
Fears of a US-Iran conflict disrupting oil flows are overstated. Any potential US military action would likely be designed to be 'surgical' to specifically avoid Iran's oil infrastructure, as the administration's priority is preventing economic shocks and energy price hikes ahead of elections.
As Russia redirects crude, China has become a key buyer, increasing imports so much that they now exceed an informal 20% cap on any single supplier's share. This signals a strategic energy policy shift and highlights China's role as a willing buyer for sanctioned Russian barrels.