Three million barrels per day of Russian oil output is at risk beginning in April as sanctions hit and buyers shun the nation's exports, the International Energy Agency said Wednesday.
The Paris-based firm said in its monthly oil report that the risk of large-scale disruptions to Russian oil production is threatening to create a global oil supply shock.
The implications of a potential loss of Russian oil exports to global markets cannot be overstated.
The United States and Saudi Arabia are the largest oil producers. Europe depends on the nation for supplies and Russia is the largest oil and products exporter in the world.
Russia's total oil and products production was around 11 million barrels per day in January 2022, of which around 8 million is exported.
2.5 million barrels per day of exports are at risk according to the IEA. Products make up 1 million of that, with 1.5 million being crude.
Should bans or public censure accelerate, these losses could deepen.
There is a chance that peace will be struck and that there will be more disruptions in the oil market.
Ukrainian President Volodymyr Zelenskyy said Tuesday that an agreement was beginning to sound more realistic, while Russian Foreign Minister Sergey Lavrov said there was hope of reaching a compromise.
Financial institutions and wealthy individuals have been targeted by the sanctions against Russia. The U.S. and Canada have banned oil imports. Europe has not followed suit because of their dependence on Russia for energy.
Due to deals that were struck before Russia launched an invasion in Ukraine, energy supplies continue to exchange hands.
Major oil companies, trading houses, shipping firms and banks are backing away from doing business with Russia because of a lack of clarity around possible future sanctions, according to the IEA.
The firm said that new business has dried up.
Russia's invasion of Ukraine has sent oil prices into a tailspin, as worries over supply disruptions in an already tight market took hold.
In late February, crude spiked above $100 for the first time in three years. Prices kept going up. The U.S. oil benchmark, West Texas Intermediate crude, traded as high as $130.50 last week, while the international benchmark,Brent crude, reached almost $140.
The rally on the way up was followed by a steep decline. On Tuesday, the price of crude was $96.62 per barrel, while the price of oil was 99.97 per barrel.
Both benchmarks closed below $100 on Tuesday after tumbling to under $100 on Monday.
Oil is up 30% for the year, which is putting inflationary pressures on the economy. The average price of gas was the highest on record last week. Higher prices have impacts on sectors and industries.
The IEA said that international sanctions against Russia are expected to depress global economic growth.
The firm cut its oil demand forecast by 1.3 million barrels per day in the second, third and fourth quarters. The IEA now pegs total demand at 99.7 million barrels of oil per day, up 2.1 million barrels per day from their previous estimates.
In its monthly report, the organization expressed the same sentiment.
The group said that challenges to the global economy will impact oil demand in various regions.
All Rights Reserved © 2024
