• Sunday, December 03, 2023
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Global oil price surges on rising Russian sanctions – IEF

Global oil demand projected at 99.7 million bpd in 2022 – IEA

The recent sanctions on Russia over its invasion of Ukraine, is driving price spikes and volatility in global energy markets says the International Energy Forum (IEF).

Data gleaned from Russia’s export hubs in the Baltics and the Black Sea show that demand for the country’s oil is thinning due to sanctions.

Joseph McMonigle, IEF Secretary-General said in a statement that the sanctions imposed on Russia are not aimed at energy supplies, but they are already having a collateral impact, as we are seeing reduced Russian oil on the market in preliminary data.

“Energy markets were already tight prior to the Ukraine conflict, and any additional supply losses will only exacerbate price spikes and volatility.”

Meanwhile, energy market volatility has spread to the rest of the world, with equities falling as concerns grow that higher commodity prices will lead to higher inflation, stifling Covid-19 economic recovery.

“The recently announced coordinated release of 60 million barrels from strategic reserves by the International Energy Agency (IEA) will help to supply temporary liquidity to the market and provide buyers with alternative sources,” McMonigle noted. Adding that, “to avoid severe economic consequences, the world relies on secure energy flows and critical energy infrastructure.”

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According to the IEF, up to 70 percent of Russia’s oil is unable to find a buyer, with some traditional buyers turning to alternative suppliers as sanctions affect insurance and shipping.

In addition, buyers face the risk of further future energy sanctions as well as the reputational risk of doing business with Russia.

Last week, global oil benchmark, Brent crude surged past $130 per barrel after the U.S announced sanctioning Russian oil and gas.

However, price volatility is likely to persist if more energy import bans are imposed as some companies in Sweden, Finland, and Portugal have already announced that they will cease purchasing Russian oil.

“The trade of Russian liquefied natural gas has been disrupted,” the IEF said. “At least four shipments have been diverted from one buyer to another as companies shift away from doing business with Russia.”

For now, the pipeline gas to Europe remains unaffected as the continent relies on Russia for some 40 percent of its pipeline gas needs.