“The implications of a potential loss of Russian oil exports to global markets cannot be underestimated,” the IEA said in its monthly report. The crisis could bring lasting changes to energy markets, she added.
Canada, the United States, the United Kingdom and Australia have banned Russian oil imports, affecting about 13% of Russian exports. But moves by major oil companies and global banks to sever ties with Moscow after the invasion are forcing Russia to offer its crude oil at a huge discount.
The big Western oil companies have abandoned joint ventures and partnerships in Russia and stopped new projects. On Tuesday, the European Union announced a ban on investments in the Russian energy sector.
The IEA, which monitors energy market trends for the world’s wealthiest nations, said refineries are now scrambling to find alternative sources of supply. They may be forced to downsize their business just as global consumers are hit by rising gasoline prices.
The UAE ambassador to the United States said last week that his country claimed to pump more, but other officials have since claimed to be committed to the OPEC + deal. Neither the UAE nor Saudi Arabia have so far shown a “willingness to tap into their reserves,” according to the IEA.
“The block’s longstanding failure to meet agreed quotas, mainly due to technical problems and other capacity constraints, has already led to large increases in global inventories,” the IEA said. If major manufacturers don’t change course and turn on the wider taps, global markets will be under-supplied in the second and third quarters of 2022, the agency warned.
The West is trying to persuade Saudi Arabia and the United Arab Emirates to change course. British Prime Minister Boris Johnson was on a visit to the Gulf on Wednesday to discuss ways to increase diplomatic and economic pressure on Russia with leaders from both countries.
The UK government said in a statement that leaders should discuss “efforts to improve energy security and reduce volatility in energy and food prices.”
Global energy markets have been extremely volatile in the wake of the Russian invasion.
Just over a week ago, Brent crude leapt above $ 139 a barrel. Analysts warned that prices could hit $ 185, then $ 200 as traders shunned Russian oil, pushing inflation even higher and adding enormous strain to the global economy.
But there has been a rapid turnaround since then. Futures on Brent crude oil, the global benchmark, have fallen nearly 30% from their peak. They stabilized below $ 100 a barrel for the first time this month after losing another 6.5% on Tuesday.
The crisis could help drive huge changes in global energy markets.
Additional supply could eventually come online from Iran and Venezuela if the United States and its allies relax sanctions against the two countries. Negotiations for a nuclear deal with Iran appear to have stalled, but an agreement could still be reached.
Last week, the European Union outlined plans to drastically reduce gas imports from Russia this year by finding alternative suppliers, accelerating the switch to renewable energy, reducing consumption through energy efficiency improvements and extending the life of power plants. coal and nuclear.
– Mark Thompson and Julia Horowitz contributed to the reporting.