The IEA revised downward its 2Q22-4Q22 forecast for oil demand by 1.3 million barrels per day, resulting in 950,000 barrels per day slower growth over the whole year. Total world demand is expected to be 99.7 million barrels per day.
The possibility of large scale disruption to Russian oil production could create a global oil supply shock with as much a 3 million barrels per day of Russian oil output remaining on the country’s local market as exports become impossible, according to the IEA. Russia is the world’s largest oil exporter shipping 8 million barrels per day to world markets.
“For now, we see the potential for a shut-in of 3 million barrels per day of Russian oil supply starting from April, but losses could increase should restrictions or public condemnation escalate,” notes the report. “Russian oil continues to flow for the time being due to term deals and trades made before Moscow sent its troops into Ukraine, but new business has all but dried up. Urals crude is being offered at record discounts, with limited uptake so far.”
The restrictions or Russian exports take place as Middle East suppliers are loath to increase production, with Saudi Arabia and the UAE “showing no willingness to tap into their reserves.”
According to the report high energy prices could have a marked impact in inflation and growth, but could also accelerate the energy transition away from oil. Crude prices remained relatively unaffected by the announcement maintaining themselves under $100 per barrel after reaching as high as $140 per barrel last week.