The International Energy Agency (IEA) on Wednesday expressed fears of a “shock” to global oil supplies following sanctions imposed on Russia after the war in Ukraine, saying it would not be easy to change Russia’s oil levels immediately.
The agency, which advises developed countries on their energy policy, wrote in its monthly report that “the potential for widespread disruptions to Russian production could shock global oil supplies.”
The war in Ukraine led to huge fluctuations in oil prices, which hit record highs before falling again (March 7 Brent crude $ 139.13 a barrel).
Russia is the world’s largest exporter of eight million barrels a day of crude oil and refined products to other parts of the world.
After the war in Ukraine, the United States and the United Kingdom decided to ban Russian oil imports, but the energy sector, in particular, was exempted from European sanctions. The International Energy Agency says many companies – oil companies, brokers, banks – have left Russia.
It estimates that Russian oil will run out of three million barrels a day by April, and that this level could rise if sanctions are tightened or public condemnation of Russia escalates.
In response to these losses, the International Energy Agency notes that “there are some indications of an oversupply of supply or a major diversion of trade flows from the Middle East.”
The Organization of the Petroleum Exporting Countries (OPEC) and its allies within the framework of the “OPEC”, especially Russia, have refused to increase their production to calm the market, insisting on a gradual increase of 400,000 barrels per day per month.
The International Energy Agency estimates that Iranian exports will increase by about 1 million barrels a day in six months, which is not enough to offset Russian oil losses.
According to Venezuela, where Washington has resumed talks, it can only make a “modest” contribution if US sanctions are lifted.
Outside of OPEC, other countries will certainly increase their production – Brazil, Canada, the United States and Guyana – but the potential is “limited” in the short term. The United States, in particular, has great potential with shale oil reserves, but it will take several months to achieve this.
On the demand side, the International Energy Agency lowered its growth forecast for 2022 by about one million barrels a day because of the high cost of raw materials and the impact of sanctions against Russia on the world economy.
Global demand is expected to increase by 2.1 million barrels per day this year to a total of 99.7 million barrels per day.
The International Energy Agency, founded in 1974, says it will release short-term recommendations this week in response to the oil shock. In some countries, it has been proposed to reduce speed limits on roads, reduce the cost of public transportation, or resort to long-distance work.
If the current situation poses a major challenge to energy markets, it represents “opportunities,” the company concluded, adding that the current alignment between economic factors and energy security factors could accelerate the shift in oil costs.
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