Tightening sanctions on Russia’s oil exports, including a planned European Union embargo, would take a heavy toll on the nation’s oil industry and could set its crude oil output back by nearly two decades, the International Energy Agency said.
Russian oil producers are struggling to find customers for their crude following Moscow’s invasion of Ukraine, forcing them to shut in supply, further tightening already stretched energy markets.
Those lost supplies amounted to 900,000 barrels a day last month and are expected to grow to as much as 3 million barrels a day from July onward, the IEA said in its monthly report Thursday. 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.
The EU has proposed banning all imports of Russian oil, measures already taken by the U.S. and some other allied Western nations. The proposal has faced opposition within the bloc, however, and some stricter aspects of the plan have been shelved.
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 which 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, narrowly exceeding supplies.
Write to Will Horner at firstname.lastname@example.org