There are likely to be large-scale oil supply disruptions because of the sanctions that could reduce Russian oil exports, the International Energy Agency said in its March Oil Market Report published on Wednesday.
The agency also forecast that global oil demand growth will decline due to a slowdown in economic growth driven by the latest surge in commodity prices and Western sanctions against Russia.
"From April, 3 mb/d of Russian oil output could be shut in as sanctions take hold and buyers shun exports," the IEA said in its latest report.
Based on these projections, the IEA revised down its oil demand estimates by 1.3 million barrels daily for the rest of the year, which would mean a 950,000-bpd decline in the annual rate of oil demand growth.
"The implications of a potential loss of Russian oil exports to global markets cannot be understated," the IEA wrote.
"Russia is the world's largest oil exporter, shipping 8 mb/d of crude and refined oil products to customers across the globe. Unprecedented sanctions imposed on Russia to date exclude energy trade for the most part, but major oil companies, trading houses, shipping firms and banks have backed away from doing business with the country."
Alternative suppliers that can step in and fill the void are few and not necessarily willing to do it, the report also noted. OPEC+ is sticking to its original agreement of a gradual ramp-up of production, and Iran's return to international oil markets could take months. Even if a new deal is agreed, the IEA said, it would take six months for Iran to boost its production by 1 million bpd, which is a third of potential Russian oil output losses.
"The current crisis comes with major challenges for energy markets, but it also offers opportunities," the IEA noted. "Indeed, today's alignment of energy security and economic factors could well accelerate the transition away from oil."
At the same time, the IEA said it would be releasing advice on how to reduce oil demand more speedily later this week.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
The first assumption of increasing likelihood of large-scale supply disruptions as a result of sanctions on Russia is flawed for the simple reason that the claim that customers are shunning Russian oil exports is a plain lie. If that was true we would have seen fast rising oil prices since no one country in the world or a group of countries can replace Russian oil exports of 8.0 million barrels a day (mbd) of crude and refined products now or ever.
The second assumption about a decline in global oil demand as a result of a slowdown in economic growth is unsubstantiated and furthermore it is contradicted by OPEC+ which sees global oil demand this year exceeding 2019’s level of 101.0 mbd. Moreover, I trust OPEC+ projections far more than the IEA’s. The geopolitical price premium from the Ukraine conflict is started to evaporate amid signs of progress in the peaceful talks between Russia and Ukraine.
The third assumption of a demand decline estimate of 1.3 mbd for the rest of the year is wishful thinking on the part of the IEA.
Based on the above, I would say that the IEA is in its elements trying every trick in the book or false information to depress global oil demand and prices.
If large scale oil supply disruptions are looming, this would be due to underinvestment in oil and gas prompted by incessant pressure by environmental activists on oil companies to divest of their oil and gas assets, hasty policies by the EU to accelerate energy transition at the expense of fossil fuels abetted by the IEA and the IEA’s discredited net-zero emissions by 2050 roadmap calling for the immediate halt of any new investments in oil and gas.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
India to Buy Russian Oil at Discount Amid Ukraine War
12 hours ago
Item: India Today
Why Russia is selling oil at discounted prices
I don't know, is the Russian government making less money selling oil today than they did, pre-invasion?
I think most of the world has had it with Putin's Russia.. Maybe a professor or two are sympathetic to Russia. Russia, after all, has fully embraced manly fossil fuel and thinks climate change is a joke.
Putin must go. Targeting a huge source of Russian government revenue makes sense. We won't be able to target Russian petroleum all at once . . . but watch what unfolds.