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The World Cannot Afford To Replace Russian Oil

The oil market will find it impossible to replace Russia’s oil, which accounts for 10 percent of global supply, Dmitry Marinchenko, senior director for natural resources and commodities at Fitch, told Russian media on Tuesday.

The escalation of the Russia-Ukraine crisis could send oil prices to above $100 per barrel, according to Fitch’s expert.  

Early on Tuesday, oil prices surged close to $100 a barrel, with Brent Crude hitting a new seven-year high of $99 before easing to $97 per barrel after Russian President Vladimir Putin recognized late on Monday two separatist regions in eastern Ukraine and deployed troops there in the most serious escalation of the crisis yet. 

A further escalation of the conflict could lead to sanctions that would restrict Russian oil exports, which “could lead to an energy crisis,” Kommersant daily quoted Marinchenko as saying.

Currently, the geopolitical premium in the price of oil is already around $15 per barrel due to the Russia-Ukraine crisis, Marinchenko told Russian news agency TASS.

Russia’s share of the global oil market is over 10 percent, and there is no one that can replace it, there is little spare production capacity—especially considering the gradual recovery in demand—even if sanctions on Iran are lifted in the near future, TASS quoted Marinchenko as saying. 

Russia, the world’s second-largest oil exporter after Saudi Arabia, exports around 5 million barrels of crude oil per day (bpd). Nearly half of it, or 48 percent, went to European countries in 2020, according to data from the U.S. Energy Information Administration (EIA). In 2021, Russia remained the largest supplier of natural gas and petroleum oils to the EU.

A plunge in Russian oil exports to Europe would be a very bullish factor for oil prices, which could hit and exceed $100 in case of a conflict in Ukraine, analysts say.  

Also today, Qatari Energy Minister Saad al-Kaabi said that replacing Russian natural gas deliveries to Europe in the short term is “almost impossible.” 

By Tom Kool for Oilprice.com 

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  • Kevin Broughton on February 28 2022 said:
    Really someone needs to get out from behind their desk 10% of global oil supply still means a 905 global oil supply, granted my degree is in justice not economics , but I seem to recall that if all the top global oil producers would increase by 1% we would have a glut of oil on the market.
    Second is this not a perfect time to move more progressively faster towards a fossil fuel alternative. Thanks to globalization we can live without Russia but can Russia live without us?
  • Matt Collins on February 26 2022 said:
    Unimaginable how anyone would not say the obvious.

    America has more oil than russia.

    America has more natural gas than russia.

    America has more coal than russia.

    America has a president who inherited this 1 year ago from trump.

    America has a president who now buys russian oil begging opec to produce more and is begging russia to stop killing millions of innocent women and children while paying them over 50 million dollars every day in oil and natural gas.

    Russia invaded a country we convinced to
    disarmed there nuclear weapons.

    Russia now threatens anyone including the usa with nuclear annihilation.

    Biden puts back sanctions he took off.

    There is nobody who thinks this will end well for the usa with biden in charge.
  • DoRight Deikins on February 22 2022 said:
    At the worst, Russian oil could/would still go to China. China seems immune to sanction pressure. Thus China would reduce their spot purchases from other producers, especially the ME, to take advantage of the low prices. That would send more Middle East and other producer oil to Europe.

    Sure it would be a little difficult for Russia for a time, but they know the West has a 15 minute attention span. And they would have the bread basket of Asia back. Far more importantly they would show their other breakaway states (Lithuania., Latvia, Estonia, Moldova, Belarus, the Central Asian 5, etc) how impotent the 'West' is. And it would even do wonders for Putin's popularity in Mother Russia.

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