Russian sanctions could create a “supply crisis” as oil production plummets.
The International Energy Agency warned on Wednesday that the global economy could be disrupted by both disruptions in oil supply and a sharp drop in demand resulting from the invasion of Ukraine by the Russia.
The organization said the world could be heading for what it called “the biggest supply crisis in decades”.
In its monthly oil market report released on Wednesday, analysts estimated that it was possible that about a third of Russian oil production, or around three million barrels a day, would be halted in April due to sanctions and restrictions imposed on major oil companies. businesses, banks and shipping companies are settling.
The agency also said the combination of soaring commodity prices and Western sanctions on Russia was likely to depress global economic growth and oil demand for the rest of 2022. The agency cut its global oil demand forecast of 1.3 million barrels per year. day, or more than 1%, for the next three quarters.
The agency said demand would fall particularly sharply in Russia due to a contraction in economic activity. Jet fuel consumption is expected to be cut by nearly half as international travel outside Russia is halted, in part to avoid the seizure of leased planes.
The deteriorating economic outlook, the agency said, helped explain the recent cooling in the oil price spike. Futures have been swirling in recent days with Brent, the international benchmark, hitting around $128 a barrel on March 8 before falling back below $100 a barrel on Tuesday. On Wednesday, Brent was up about 3% to around $102.70.
So far, reshuffling of the oil market to deal with sanctions on Russia, the world’s biggest oil exporter according to the agency, has been limited.
The agency said there were few signs that oil-producing countries in the Middle East were increasing supplies to markets like Europe that normally consume large volumes of Russian oil. And despite growing efforts to send Russian crude to buyers in China and India, two oil-importing giants who failed to back sanctions, high costs and “reputational risks” are complicating sales, the agency said. agency.
Only Saudi Arabia and the United Arab Emirates – as well as Iran, which is still under sanctions that restrict its oil sales – have the capacity to quickly add large volumes to compensate for all that is lost from Russia. But OPEC Plus, the producer group led by the Saudis and Russia and including the United Arab Emirates and Iran, recently refused to do more than its usual monthly increase of 400,000 barrels per day, saying the market was “well balanced”.