EU Oil Embargo Would Push Russian Crude Output to 18-Year Low, IEA Says

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Bloc’s plans could drive down Russian supply by 3 million barrels a day, according to agency

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Those lost supplies amounted to 900,000 barrels a day in April and are expected to grow by a further 600,000 barrels a day this month. Plans by the EU, which is the biggest destination for Russian crude, to phase out Russian oil imports completely would likely push those losses to as much as 3 million barrels a day starting in July, the IEA said in its monthly report Thursday.

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For the year, that would drive Russia’s oil output down to 9.6 million barrels a day, which would mark its lowest level since 2004. Last year, Russian oil production was around 10.9 million barrels a day.

The EU has been slower than other Western importers in weaning itself off Russian crude. The region’s economy is heavily dependent on Russia’s oil-and-gas supplies. The US, the UK and other Western nations have already announced plans to either ban or phase out their imports of Russian oil.

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While still expecting a significant decline in output, the IEA’s prediction isnt as pessimistic as its earlier forecasts as Russia has succeeded in redirecting a significant amount of oil from its lost customers in the West to developing economies such as India’s. In its previous report, the IEA had said it expected lost Russian output would already total 3 million barrels a day starting in May.

Russian oil exports rebounded in April, after dropping in the previous month as the first Western sanctions took effect, the IEA said. Russia’s oil exports rose by 620,000 barrels a day to 8.1 million barrels a day, close to its prewar levels. While oil shipments to the EU, US and UK fell by around 1.2 million barrels a day, cargoes bound for India and Turkey jumped by 730,000 barrels a day and 180,000 barrels a day, respectively.

The EU’s dependence on Russian oil has prompted some members to push back against the proposals. Some stricter aspects of the plan have been shelved while Hungary has threatened to veto the proposal altogether.

Russia’s struggling output, coupled with constrained supply from members of the Organization of the Petroleum Exporting Countries, is keeping the oil market in a narrow deficit, something that analysts expect will keep energy prices high and add to strain on the global economy.

The IEA cut its forecasts for global oil supply this year by 100,000 barrels a day to 99.2 million barrels a day.

Still, lost supplies from Russia are being partly balanced by waning demand. Covid-19 outbreaks in China and Beijing’s strict lockdowns have reduced the global appetite for crude. Signs of flagging economic growth are also expected to reduce demand for oil.

The IEA cut its forecasts for oil-demand growth by 200,000 barrels a day in both the second and third quarter of the year, to 1.9 million barrels a day and 1.2 million barrels a day, respectively. In the fourth quarter, the IEA expects demand for oil to contract by 200,000 barrels a day.

Total demand for oil this year is forecast to stand at 99.4 million barrels a day, narrowly exceeding supplies.

Write to Will Horner at [email protected]


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