Potential Loss of Russian Oil Looms
March 4, 2022
The energy markets are higher again to start out this Friday as traders worry about the loss of Russian supplies. The West continues to consider banning Russian supplies or suspending purchases but either way the loss of those barrels will be tough to replace quickly. There are reports that buying Russian energy is getting more difficult but China and others, including the West, are still seeing Russian supplies. There are also reports that some oil shipments are getting canceled because of high prices and alternative supply sources are not being sought out.
JP Morgan said 66% of Russian oil is struggling to find buyers. It said if disruptions to Russian volume last throughout the year, Brent crude oil price could exit the year at $185 per barrel. It said that in the immediate term, the price of oil needs to increase to $120 per barrel and remain there for months to incentivize demand destruction, assuming there is no immediate Iranian volume coming into the market. JP Morgan added that to further calm the market and keep prices anchored at around $100 per barrel, the IEA could commit to releasing 50 million barrels per month for the rest of the year or even more.
In another report, IEA Executive Director, Fatih Birol, said the International Energy Agency member countries have enough oil stocks to release more into the market to lower prices after Russia’s invasion of Ukraine. He said, “We have more than enough stocks to take further action if warranted. The 60 million barrels is only 4% of our stocks.”