![]() In early March, 70% of Russia's seaborne oil exports were in an indeterminate state, struggling to find buyers. 13 And global seaborne markets are currently hesitant to absorb Russian cargoes. 12 The United Kingdom and United States have implemented embargoes. 11 Germany has made plans to end Russian oil imports by the end of 2022. The European Union has announced a plan to transition away from Russian oil and gas. A curtailment of Russian oil and (especially) gas to Europe would likely require policy responses and could lead to the rationing of energy across energy-dependent sectors.Ĭountries are already preparing for possible supply disruptions. Commodity prices could be pushed to all-time highs. And if oil (crude and product) supplies from Russia are disrupted, refiners will likely be challenged to secure feedstocks to replace them.Īny supply shocks caused by the invasion in Ukraine will likely affect Europe significantly and, to a lesser extent, the rest of the world. However, demand is expected to grow over the next several years. Pre-invasion oil product demand forecasts of 83 million barrels (mmb)/day may fall to 79 mmb/d or lower this year. If crude oil supplies from Russia are curtailed, the margin impact could be more significant as some refiners are not able to easily replace Russian crude oil. A persistent high oil price environment coupled with inflation may continue to erode fuels demand. This means facilities have been underutilized and refiners have faced increasing margin pressures. Historically, refinery capacity has been outstripping demand. Some refineries-especially in Germany and central and eastern Europe-are dependent on Russian crude oil. The earliest they could be ramped up is estimated to be at the end of 2023. But Europe's liquefaction and terminal capacities are quite limited. LNG imports may be considered as part of a longer-term solution. In the face of a sudden shortfall of gas supply, Europe would be hard pressed to find alternatives. Given that Ukraine's transit pipelines can carry more than a third of Russian exports to Europe, 9 the latter risk is concerning. 8 Additionally, Russian pipelines to the EU may be at risk of supply disruption-either through unilateral decisions to limit gas imports or infrastructure damage. We’ve already seen Russia take actions to halt gas supplies to Poland and Bulgaria. Sanctions to limit oil and gas imports have not yet been enacted. With the recent invasion of Ukraine, Europe's dependence on Russian oil and gas presents a potential existential crisis. Together, these factors will ensure that oil prices remain high and markets tight-despite the recent 260,000 boe/day drop in estimated oil demand in 2022, especially from China. As does the steady depletion of existing inventory (a 19% decline for OECD countries between August 2020 and March 2022 4 ). The recent unplanned supply disruption in Libya (resulting in almost 550,000 barrel of oil equivalent (boe)/day being taken out of the supply mix 3 ) adds to the concern. Russia's invasion of Ukraine raises concerns that Russian supplies may be curtailed. ![]() However, several factors have made those assumptions obsolete. That deficit was expected to close by 2Q22 mainly driven by non-OPEC+ producers. By 4Q21, the excess demand peaked at 2 million barrels/day. Since 2021, daily oil demand has exceeded supply by more than one million barrels. Their growing populations and transportation sectors, coupled with lower investment in clean energy, means that there are few alternatives to oil. Heavy industry, residential and commercial buildings and electric power providers are other end users with significant demand for liquid fuels.įrom a geographic perspective, developing economies are expected to be the main drivers of global oil demand moving forward. Per our analysis, these fuels make-up 94% of the sector's energy demand. The transportation sector is particularly dependent on liquid fossil fuels.
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