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Oil prices will remain elevated in the coming months as current supply losses from Russia at around 1 million barrels per day (bpd) could double this month, BP’s chief executive Bernard Looney told CNBC on Tuesday.
“We’ve got probably about 1 million barrels per day of Russian oil off the market at the moment,” Looney said.
“That may double this month when sanctions come truly into effect, or maybe even more,” BP’s top executive noted, commenting on where he sees oil prices going for the rest of this year.
In addition, stockpiles of oil and gas are low around the world, and spare capacity in oil “is relatively low,” Looney told CNBC.
Sure, there are uncertainties in the outlook, including those regarding a nuclear deal in Iran, the global economic growth with high inflation, what will happen with U.S. shale or with China’s zero-COVID policy, BP’s executive added.
“There are lots of uncertainties in the outlook, but I think it would be fair to say that our view is that there will be no let up in prices for some time, and we can continue to expect a lot of volatility in energy markets as they readjust and attempt to rebalance,” Looney said.
The EU is currently discussing an embargo on imports of Russian oil and could offer exemptions to Hungary, which has threatened to veto a ban on imports from Russia.
Although there isn’t (yet) an official ban on Russian oil sales in Europe, major international traders have already said they would either cut or phase out purchases of Russia’s crude in the coming weeks. The world’s top independent oil trader, Vitol, plans to wind down its activities involving Russian crude oil by the end of this year, Bloomberg reported last month, citing a spokesman for the company.
In its latest Oil Market Report for April, the International Energy Agency (IEA) expected Russian oil supply to have fallen by 1.5 million bpd in April, with supply losses projected to accelerate to around 3 million bpd from May.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
Crude oil prices are elevated principally because the global oil market is now at its most bullish state since 2014 with robust global oil demand.
Moreover, there is no proof whatsoever of BP' Chief's claim of Russian oil exports declining by 1.0 million barrels a day (mbd). If that was the true, it would have been reflected in Brent crude heading steeply upwards particularly in a tight market like the current one.
Even if a EU embargo on Russian oil and products exports estimated at 4.2-5.6 (mbd) was to be agreed, it will be a gradual one enabling Russia to sell the bulk of its exports to China, India, Turkey and may other countries and also find new customers even among Western oil traders.
Moreover, Russia won’t lose financially since skyrocketing oil prices will offset any reduction in its oil exports while the EU and the US will pay through the nose, that is if they were able to find a replacement to Russian oil supplies.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London