IEA warns oil industry faces 'what could turn into the biggest supply crisis in decades'
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Faced with what could turn into the biggest supply crisis in decades, global energy markets are at a crossroads, the International Energy Agency (IEA) said.
Russia's invasion of Ukraine has brought energy security back to the forefront of political agendas as commodity prices surge to new heights. While it is still too early to know how events will unfold, the crisis may result in lasting changes to energy markets, it added.
"Surging commodity prices and international sanctions levied against Russia following its invasion of Ukraine are expected to appreciably depress global economic growth. As a result, we have revised down our forecast for world oil demand.
"The prospect of large-scale disruptions to Russian oil production is threatening to create a global oil supply shock. We estimate that from April, 3 mb/d of Russian oil output could be shut in as sanctions take hold and buyers shun exports. OPEC+ is, for now, sticking to its agreement to increase supply by modest monthly amounts. Only Saudi Arabia and the UAE hold substantial spare capacity that could immediately help to offset a Russian shortfall," the IEA said.
The IEA said the implications of a potential loss of Russian oil exports to global markets cannot be understated. Russia is the world's largest oil exporter, shipping 8 mb/d 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. For now, we see the potential for a shut-in of 3 mb/d of Russian oil supply starting from April, but losses could increase should restrictions or public condemnation escalate.
"Surging oil and commodity prices, if sustained, will have a marked impact on inflation and economic growth. While the situation remains in flux, we have lowered our expectations for GDP and oil demand. We now see oil demand growing by 2.1 mb/d on average in 2022, a downgrade of around 1 mb/d from our previous forecast," the IEA said.
