The price of oil rose more than 6 on Tuesday, with the main driver being news that Russia is sharply cutting its oil production.

Reuters sources report a fall in production in the first days of April to 10.32m BPD, down from an average of 11M in March and 11.06M in February. But the same sources report that only 9.76M was produced on Monday, noting an increasingly rapid drop in production. By comparison, the low point of Russian oil production at the deep of the coronavirus restrictions was 9.37M barrels.

A 12 drop in production or 1.7M BPD in just a month and a half calls this quarters global oil stockpile growth projections into question. Another source, the International Energy Agency, expects Russian production to fall by 1.5M BPD in April and 3m BPD in May. A gradual production rampup cannot offset such a dip. Neither will it help to reduce forecasted demand growth rates.

Russia probably has not yet solved the problem of drastically changed logistics due to sanctions. But investors should also bear in mind how devastating the sanctions have been on the energy sectors of Iran and Venezuela, where production decreased 24 times from the presanctions peak. The falling volumes of these countries have been replaced by Russia, the US and Saudi Arabia, but there is little indication that the latter two have the strength to pick up the formers export share.

Oil prices have been bouncing back since March 24th on reports of increased sales from strategic reserves by the US…