The world is at risk of experiencing unprecedented damage to oil supply and the war between Russia and Ukraine is making things worse, says a report by Oil Price.
In an analysis of the circumstances in the oil market, the International Energy Agency (IEA) pointed out that 3 million barrels per day could be lost worldwide from Russia’s supply as of April, since the sanctions against banks and buyers’ reluctance to buy Russian oil could spark the biggest oil supply crisis in decades.
Since Russia’s invasion of Ukraine began, the United States has banned energy imports while the UK is working to phase out its Russian supply by the end of the year and other countries are doing the same.
The armed conflict occurred at a time when the oil market was already tightening, with inventories in OECD economies already well below the five-year average and at their lowest levels in eight years.
Oil Price notes that if Saudi Arabia and If the UAE were to tap into its reserves to come to the rescue, global spare capacity, much of it in its hands, would be so scarce that it would worsen Russian oil supplies or another disruption in Libya, leaving world oil producers with a cushion so small that an increase in prices would surely follow.
It is also indicated that the US could not increase its production despite the “blessing” of the White House and Energy Secretary Jennifer Granholm, who called on US producers to “responsibly increase supply in the short term” to stabilize the market and minimize harm to American families.
The reason is that the producers have said that It’s not that simple, because there is a time lag between drilling and first oil, also caused by years of underinvestment, capital discipline, discouraging federal policies toward the oil industry, and supply chain bottlenecks.
And for those who think that the additional barrels could come from Iran, the IEA points out that this solution “could take months”, adding that the Islamic Republic could increase exports by around 1 million bpd for a period of six months, in the event that an agreement is reached.
In this context, a complicated outlook is expected to supply the global market, which will surely continue to push upwards the price of fuel.
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