The Russian oil embargo will not trigger a supply shock, says the IEA

The Russian oil embargo will not trigger a supply shock, says the IEA

After warning on March 16 that 3 million barrels per day could be shut down from April, the IEA cut that number a second time as it noted that just 1 million barrels per day had gone offline.

Increased production elsewhere and slower demand growth due to China’s lockdowns will prevent a large deficit, the Paris-based IEA said.

“Over time, steadily increasing volumes from OPEC+ in the Middle East and the US, coupled with a slowdown in demand growth, are expected to stave off an acute supply deficit amid a deepening Russian supply disruption,” the IEA said in its monthly oil report.

“Rising pump prices and slowing economic growth are expected to significantly slow recovery in demand through the end of the year and into 2023,” the IEA said, adding that restrictions to contain Covid-19 in China have fueled a prolonged economic slowdown there.

Around a million barrels a day of Russian oil closed last month due to slower product exports and falling domestic demand — about half a million fewer than the agency previously forecast.

The IEA expects that figure to rise to 1.6 million barrels a day in May, 2 million in June and nearly 3 million from July if sanctions prevent further buying or expansion.

The United States and other IEA members pledged to release 240 million barrels of oil in their second emergency supply tap this year, after the IEA suspended a US-led release in November because it saw no major supply disruptions at the time.

Russian exports rebounded in April by 620,000 barrels a day from the previous month to 8.1 million barrels, the IEA said, back to their January-February average as shipments from the United States and Europe, mainly to India, were redirected.

As it works to ban Russian oil, the European Union remained the top market for Russian oil exports last month, the IEA said, down just 535,000 barrels a day since the start of the year.

The bloc now accounts for 43% of Russia’s oil exports, up from around 50% then.

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