Russian sanctions could lead to a ‘supply crisis’ due to a drop in oil production.
The International Energy Agency warned on Wednesday that the global economy could be hit by both a disruption in oil supplies and a sharp drop in demand as a result of Russia’s invasion of Ukraine.
The organization called the world “the biggest supply crisis in decades”.
In their monthly oil market report published on Wednesday, analysts estimated that about a third of Russian oil production, or about three million barrels a day, was likely to be shut down in April due to restrictions and sanctions on key oil. Companies, banks and shipping firms took hold.
The agency also said that a combination of rising commodity prices and Western sanctions on Russia is likely to slow global economic growth and slow oil demand for the rest of 2022. The agency drastically cut its forecast for global oil demand by 1.3 million barrels. days, or more than 1 percent, for the next three quarters.
The agency said the contraction in economic activity would result in a particularly sharp fall in demand in Russia. Jet fuel consumption was expected to be cut by nearly half as international travel from Russia has been halted, partly to avoid the seizure of leased aircraft.
The agency said deteriorating economic prospects helped explain the cooling of recent oil price hikes. Futures have risen in recent days with international benchmark Brent crude, which rose to $128 a barrel on March 8 before falling below $100 a barrel on Tuesday. On Wednesday, Brent was up about 3 percent at around $102.70.
According to the agency, the reshuffle in the oil market so far has been limited to deal with the sanctions imposed on Russia, the world’s largest oil exporter.
The agency said there is little sign that Middle Eastern oil-producing countries are increasing supplies to markets such as Europe, which typically consume large amounts of Russian oil. And despite efforts to send Russian crude to buyers in China and India, the two huge oil importers who have not backed down on sanctions, high costs and “reputational risks” are complicating sales, the agency said.
Only Saudi Arabia and the United Arab Emirates – along with Iran, which is still under sanctions that restrict its oil sales – have the ability to quickly add large quantities to fill in what has been lost to Russia. . But OPEC Plus, a group of producers led by Saudis and Russia and which includes the United Arab Emirates and Iran, recently declined to exceed its usual monthly 400,000-barrel-day increase, saying markets Was “well balanced”.
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