[Financial News]
Smoke rises from chimneys as lights are lit at an oil refinery complex in Omsk, Russia, on the 16th. The IEA has warned that Russias oil production could drop by 30% from April as oil majors leave. Reuters News 1
The International Energy Agency warned on the 16th that Russias oil production will inevitably decline by 30% starting next month.
If Saudi Arabia and other major energy exporting countries do not increase production, the world could face the largest energy supply crisis in decades, the IEA said.
The IEA judged that Russias oil production disruption was inevitable as major oil companies withdrew from Russia in the aftermath of Russias invasion of Ukraine.
In its report, the IEA predicted that Russia, the worlds second-largest oil producer, would lose 3 million barrels of oil per day starting in April. Before the invasion of Ukraine, Russia produced about 10 million barrels a day, half of which was exported.
“The decline in Russian oil exports will have an impact that cannot be overlooked on the international market,” the report said, predicting that the resulting supply crisis could lead to lasting changes in the energy market.
Some countries have begun to ban Russian oil imports as a means of sanctions following the invasion of Ukraine.
The United States, Canada, the United Kingdom and Australia have entered into bans on Russian oil imports. It accounts for about 13% of Russias oil exports. This means that the impact is not large.
However, the withdrawal of oil majors including Shell from Russia is different.
Petroleum majors withdrew from joint ventures with Russian oil companies and stopped new investment. The European Union announced on the 15th a ban on investment in the Russian energy industry.
If the peace talks between Russia and Ukraine break down and oil prices start to soar again, the situation could get out of control.
This is because only two major oil-producing countries, Saudi Arabia and the United Arab Emirates, have significant production capacity. Of the 23 countries in the Organization of Petroleum Exporting Countries, including Russia, only these two countries have substantial production capacity, but these are negative for increased production.
The UAE is sending mixed signals.
Last week, the UAE ambassador to the United States said that production could be increased, but UAE government officials have since changed their minds, saying they will continue to follow OPEC+s decision to increase production by 400,000 barrels a day.
The IEA pointed out that neither the UAE nor Saudi Arabia showed an active intention to increase production.
Meanwhile, oil prices continued to decline since the 14th.
As Ukraine and Russia resumed the fourth round of negotiations, hopes for a deal have lowered oil prices.
Brent crude, the international oil price benchmark, fell 2.35% to $97.56 a barrel, and West Texas crude, the benchmark US oil price, closed at $95.04 a barrel, down 1.45%.
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