Millions of Russian Oil Barrels Could be Shut in Next Month

Millions of Russian Oil Barrels Could be Shut in Next Month
Three million barrels per day of Russian oil production could be shut in.

From April, three million barrels per day of Russian oil production could be shut in as sanctions take hold and buyers shun exports.

That’s according to the International Energy Agency’s (IEA) latest oil market report, which added that the prospect 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 understated,” the IEA report said.

“Russia is the world’s largest oil exporter, shipping eight million barrels per day of crude and refined oil products to customers across the globe. Unprecedented sanctions imposed on Russia to date exclude energy trade for the most part, but major oil companies, trading houses, shipping firms and banks have backed away from doing business with the country,” the report added.

“For now, we see the potential for a shut-in of three million barrels per day of Russian oil supply starting from April, but losses could increase should restrictions or public condemnation escalate,” the report continued.

The report noted that only Saudi Arabia and the UAE hold substantial spare capacity that could immediately help to offset a Russian shortfall. The countries are, so far, showing no willingness to tap into their reserves, according to the report.

Prospects of any additional supplies from Iran could also be months off, the report warned.

“Talks over a nuclear deal that paves the way for sanction relief have apparently stalled just before the finish line,” the report stated.

“Should an agreement be reached, exports could ramp up by around one million barrels per day over a six-month period. Outside of the OPEC+ alliance, growth will come from the U.S., Canada, Brazil and Guyana, but any near-term upside potential is limited,” the report added.

3-Year Impact

In a report sent to Rigzone on Tuesday, analysts at Standard Chartered stated that they expect consumer reluctance to buy from Russia and shortages of capital, equipment and technology to continue to depress Russian output over at least the next three years.

“We forecast that output will fall by 1.612 million barrels per day year on year in 2022, and by a further 0.217 million barrels per day in 2023, with the year on year decline peaking at 2.306 million barrels per day in Q2-2022,” the analysts stated in the report.

“We estimate that to avoid significant upside price pressure the market would require around two million barrels per day extra supply for the remainder of 2022, and an additional two million barrels per day in Q2 to ease the dislocations caused by the displacement of Russian oil,” the analysts added.

“The temporary two million barrel per day Q2 boost could come from strategic reserves, but the two million barrel per day additional flow for the remainder of 2022 would likely need to come from OPEC sources – including potentially Iran,” the analysts continued.

Source: rigzone.com

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