Oil rose nearly 3% on Wednesday, returning to above $100 a barrel and recovering from earlier decline, as concerns about slowing demand in China eased, though signs of progress in Russia-Russia peace talks eased. and Ukraine limited progress.
Brent crude trades up as much as 1% to $100.36 a barrel. US West Texas Intermediate (WTI) crude is also trading in the same vein at $97.14 a barrel.
Oil resumed the upward path after the International Energy Agency (IEA), based in Paris, anticipated this Wednesday that it fears a strong “impact” on world oil supply, after the sanctions imposed on Russia for the invasion of Ukraine . “The prospect of large-scale disruptions to Russian production threatens to create a global shock to oil supply,” the agency, which is made up of 31 countries and advises major developed nations on energy policy, wrote in its monthly report.
Less oil, more uncertainty, less growth and more inflation
According to the IEA, the increase in the price of raw materials and the sanctions imposed on Russia “should considerably reduce global economic growth” and affect inflation, to which it added a gloomy outlook of supply shortages and uncertainty for the oil market.
Russia is the world’s largest exporter of oil and refined products to the rest of the world, with 8 million barrels per day (mbd). The United States and the United Kingdom imposed an embargo on Russian oil due to the war in Ukraine, but in Europe the energy sector is excluded from the sanctions of the European Union (EU). However, the IEA notes that many companies have moved away from Russia on their own and estimates that as of April 3 million barrels of Russian oil may not be available.
Against these losses, “there are few signs of an increase in supply from the Middle East or of a significant reallocation of trade flows,” says the IEA.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies in the OPEC+ framework, which includes Russia, are currently refusing to increase production to ease the market, sticking to a gradual increase of 400,000 barrels per day each month.
As for demand, the IEA revised its forecast downwards and it is now expected to increase by 2.1 mbd this year, to a total of 99.7 mbd.
Devastating shortage of diesel fuel: transport comes to a standstill
As the Oilprice site revealed, crude oil shortages are invariably bad news for those who consume petroleum products. But when it comes to these products, diesel shortages have the potential to be even more devastating than crude oil shortages. Rowena Edwards of Reuters reported in early February that supply shortages of crude oil, gas and coal were starting to spread to petroleum products, particularly middle distillates, the most popular of which is fuel oil. diesel.
Fuel, whose biggest market is freight, was hit hard during the pandemic shutdowns as freight rates fell. However, after the end of the lockdowns, as economies began to recover from the worst of the pandemic, transportation picked up and demand for diesel fuel increased. However, production still has to catch up.
Diesel fuel stocks in Europe are at their lowest level since 2008 and 8%, or 35 million barrels, below the five-year average for this time of year.
In the United States, the situation is even more serious. There, diesel fuel inventories are 21 percent lower than the five-year seasonal average before the pandemic, which translates to 30 million barrels.
In Singapore, a global energy trading hub, diesel fuel inventories are 4 million barrels below the seasonal average of five years before the pandemic.
What is perhaps worse, however, is that in the last 12 months, combined diesel fuel inventories in the US, Europe and Singapore have lost a combined 110 million barrels that have yet to be replaced.
UK asks Arabs to pump more oil
In this framework, British Prime Minister Boris Johnson began a visit to the United Arab Emirates (UAE) and Saudi Arabia on Wednesday in search of increasing oil production to control prices.
Johnson arrived in Abu Dhabi for talks with Crown Prince Mohammed bin Zayed and was scheduled to continue the trip to Riyadh as the West seeks to end its dependence on Russian oil.
Johnson will meet with Saudi de facto leader Crown Prince Mohammed bin Salman, making him one of the few Western rulers to visit Riyadh since the assassination of Saudi journalist Jamal Khashoggi in 2018.
Johnson promised to raise the issue of human rights with Prince Mohammed, but also highlighted London’s “very important relationship” with the Gulf countries.
He said the visit will also seek to increase British investment in green energy, including a $1.3 billion announcement from Saudi energy group Alfanar for a project to produce aviation fuel from waste. “It’s not just a matter of looking at the OPEC countries and seeing what they can do to increase supply, although that is important,” Johnson told British media.
“When we look at the dependence that the West in particular has developed on Putin’s hydrocarbons, on Putin’s oil and gas, we can see what a mistake that has been because he can blackmail the West,” he added.
A spokesman for Johnson said he would also ask the princes to condemn Russian President Vladimir Putin for the assault on Ukraine.
Saudi Arabia and the UAE, two of the world’s biggest oil exporters, have ties to Moscow and have avoided taking a stand against Russia. But Johnson said before leaving that the impact of Russia’s “brutal and unprovoked” attack would be felt far beyond Europe.