Oil market may face "biggest supply crisis in decades"

Russia's 3 million b/d oil production may decline
starting in April as sanctions and buyers reduce the impact of buying Russian oil, the International Energy Agency said on Wednesday (March 16).

[CNBC reported on March 16]

In its monthly oil report, the Paris-based agency said: "There is a possibility of large-scale disruptions in Russian oil production, which has the potential to have a shock
to global oil supplies.
" He added that this could end up being "the biggest supply crisis in decades.
"

The IEA added: "The potential impact of Russian oil exports on global markets cannot be underestimated
.
”
。

Russia is the third largest oil producer after the United States and Saudi Arabia
.
But Russia is the world's largest exporter of oil and products, and Europe depends on Russia
for oil supplies.

In January 2022, total Russian oil and products production was 11.
3 million b/d, of which about 8 million b/d were exported
.

Looking ahead, the IEA said 2.
5 million b/d production was risky
.
Of this, 1.
5 million b/d was crude oil and the other 1 million b/d were refined products
.

"These losses could deepen if a ban is enacted or a public condemnation of the acceleration," the agency added
.

Ukrainian President Volodymyr Zelenskyy said Tuesday that the peace deal was starting to "sound more realistic.
"
Meanwhile, Russian Foreign Minister Sergey Lavrov told the BBC that "there is little hope of reaching a compromise
.
" "If an agreement is reached, how the sanctions will be lifted is unclear
.

So far, sanctions against Russia have spread to all sides
.
The United States and Canada have banned oil imports, while Britain has said it will phase out oil
purchases.
But other European countries have not followed suit because they are very dependent on Russia
for energy.

Energy trading is still ongoing due to agreements reached before the Russia-Ukraine conflict
.

But the IEA said major oil companies, trading companies, shipping companies and banks were pulling out of business with Russia for "reputational reasons" and a lack of clarity about possible future sanctions
.

The Russia-Ukraine conflict has led to lower oil prices as concerns about supply disruptions in an already tight market have intensified
.

For the first time since 2014, crude oil prices topped $
100.
Since then, prices have continued to climb
.
U.
S.
oil benchmark West Texas intermediate crude traded as high as $130.
50 last week, and Brent crude was near $
140.

But in the process of rising, the strong rebound was accompanied by a sharp drop
in oil prices after that.
On Tuesday, West German Intermediate crude was trading at $96.
62 a barrel and Brent at $
99.
97 a barrel.

West German Intermediate crude fell below $100 on Monday, after both benchmarks closed below $
100 on Tuesday.

Oil prices are still up about 30 percent this year, adding to inflationary pressures
across the economy.
Last week, gasoline prices at gas stations rose to their highest level on record
.
Given the widespread use of oil – for example in plastics and manufacturing – higher oil prices have implications
across sectors and industries.

"The surge in commodity prices and the international sanctions imposed on Russia after the conflict between Russia and Ukraine are expected to significantly dampen global economic growth," the IEA said.

In light of this, the agency cut its oil demand forecast by 1.
3 million b/d
in the second, third and fourth quarters of this year.
The IEA is now putting total demand at 99.
7 million b/d in 2022, up 2.
1 million b/d
from 2021 levels.
OPEC expressed a similar sentiment
in its monthly report released on Tuesday.

"Looking ahead, the challenges facing the global economy – particularly slowing economic growth, rising inflation and ongoing geopolitical turmoil – will affect oil demand across regions," the agency said.