The International Energy Agency (IEA) said on Wednesday that it feared a strong “shock” on global oil supply consequence of the sanctions against Russia for the invasion of Ukraine, and considered that Russian oil could not be replaced immediately.
“The prospect of large-scale disruptions to Russian production threatens to create a global shock to oil supply,” the agency, which advises developed countries on energy policy, wrote in its monthly report.
The war in Ukraine is creating a great volatility in the marketswith prices that have approached record highs – Brent crude reached 139.13 dollars on March 7 – although they later fell back.
Russia is the world’s largest exporter of oil and refined products to the rest of the worldwith 8 million barrels per day (mbd).
The United States and the United Kingdom imposed an embargo on Russian oil due to the war in Ukraine, but in Europe the energy sector is excluded from the sanctions of the European Union (EU).
However, the IEA notes that many companies have moved away from Russia on their own and estimates that as of April 3 mbd of Russian oil may not be available.
“Transition”
In the face of this shortage, “there is little indication of an increase in supply from the Middle East or of a significant reallocation of trade flows,” says the IEA.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies under OPEC+, which includes Russia, they refuse for the moment to increase production to ease the marketsticking to a gradual increase of 400,000 barrels per day each month.
Countries with additional production capacities, such as Saudi Arabia and the United Arab Emirates, do not seem to want to increase their production, and Iran’s return to the oil market, which depends on a possible international agreement on its nuclear program, will not be immediate.
The IEA estimates that Iran’s exports could increase by around 1 mbd for six monthsan insufficient figure to compensate for the loss of Russian oil.
Venezuela – with which Washington has resumed dialogue – could only make a “modest” contribution in the event of the lifting of US sanctions.
Outside of OPEC+, other countries will most likely increase their production, such as Brazil, Canada, the United States and Guyana, but the potential is “limited” in the short term.
The United States in particular has potential with its shale oil reserves but it should take months to materialize.
As for demand, the IEA revised its forecast downwards and it is now expected to increase by 2.1 mbd this year, to a total of 99.7 mbd.
The IEA, created in 1974 to deal with the oil crisis, indicated that it will publish recommendations this week to reduce demand in the short term.
In some countries there are proposals to lower the speed limit on highwaysreduce the price of public transport or resort to teleworking.
The agency points out, however, that despite the great current challenge for energy markets there are also “opportunities” to accelerate the energy transition to the detriment of oil. (I)
Source: Eluniverso
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