Global Oil Market Braces for Impact of US Sanctions on Russia
The latest round of US sanctions on Russian oil has sent shockwaves through the global energy market, with the International Energy Agency (IEA) warning of potential disruptions to Russia’s oil supply chains. In its monthly report, the IEA cautioned that the sanctions could lead to a tightening of the global market, despite an expected surplus in oil supply this year.
Sanctions Target Russian Oil Exports
The new sanctions, which cover entities responsible for over a third of Russian and Iranian crude exports, have raised concerns about the impact on global oil supplies. While the IEA has not yet factored the measures into its supply forecasts, it acknowledges that they could result in a significant tightening of crude and product balances.
A Cautious Approach
In contrast to its earlier predictions, the IEA has taken a more cautious approach in assessing the impact of sanctions on Russian supply. In March 2022, the agency predicted that up to 3 million barrels per day of Russian supply might not reach the market due to Western sanctions and buyer reluctance. However, Russian supply never fell by that much, and the agency later revised its predictions.
Revised Forecasts
The IEA has made minor revisions to its forecasts, predicting 2025 global oil demand growth at 1.05 million barrels per day, down from a previous view of 1.1 million barrels per day. The agency expects 2024 demand to have grown by 940,000 barrels per day.
China’s Economic Challenges
Hanging over the 2025 outlook is China, which faces economic challenges and a shift to electric vehicles, tempering oil demand prospects in the world’s second-largest consumer.
Oil Prices Unchanged
Oil prices were little changed following the release of the report, up 6 cents at $79.98 per barrel.
US Sanctions Package
Washington’s latest sanctions package lists over 160 tankers, which moved around 22% of Russian seaborne oil exports in 2024. Previous vessel designations had been “highly effective, reducing the activity of designated tankers by 90%”.
Impact on Global Oil Supply
The IEA expects global oil supply growth to reach 1.8 million barrels per day in 2025, with non-OPEC+ production accounting for the majority at 1.5 million barrels per day. While the agency did not provide an estimate for market surplus in 2025, it previously forecast a surplus of at least 950,000 barrels per day, describing the market as “comfortably supplied”.
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