Russian Energy Supplies Continue to Be a Concern
March 23, 2022
Energy markets had had a decent trading range in yesterday’s trading as the market congested yesterday as it continues to try and stay on pace with the headlines. The news on Russia and Ukraine continues to move the market. There is also the underlying tone of short supplies for energy. Current inventories on crude and products are at or below the five-year average for this time of year and that fact offers some support for the market.
The market was back and forth yesterday as there was not a ton of market-moving news. The market was a bit easier as the reality sunk in that Europe will not be able to cut off Russian supplies. The thought now is that Russia may be the one to cut off supplies. Natural gas is the big one as this is the one energy source that will be the most difficult to replace. The IEA said that the EU imports about 4 million BPD of oil and 0.5 million BPD of diesel from the former Soviet Union and primarily Russia.
The API called crude oil stocks down 4.28 million barrels, gasoline down 626,000 barrels, and distillates up 826,000 barrels. The 4.28 million was more than the market is expecting today from the DOE inventory report. The Bloomberg estimate is for crude to be down 338,000 barrels. The outlook for gasoline is for stocks to be down 1.5 million and distillate down 975,000. The estimate for propane is for there to be a draw of 1.11 million barrels.
Vitol’s Chief Executive, Russell Hardy, said the energy market shock following Russia’s invasion of Ukraine could tip the world into an economic recession, especially if the war drags on. He said a transition away from Russian commodities will take five to ten years. He said Vitol is not buying spot Russian cargoes and is sticking to term oil export contracts with Russia. He also said he does not expect a significant one-off OPEC oil output increase in the next few months. He said Iran could increase its exports by 1 million BPD if a nuclear deal is reached.
Trafigura’s Chief Executive, Jeremy Weir, said the market is down 2 to 2.5 million BPD of Russian oil, adding that the tight diesel market will be especially hard for Latin America and Africa to bear.
Oil pipeline consortium Caspian Pipeline Consortium said one of three mooring ports in the Black Sea was damaged by a storm. This port does ship Russian crude. The estimates for repairs say it will take at least three weeks but could be more. CPC said it hopes exports will not be affected as two other berths can continue to operate. Russia and Kazakhstan oil exports by the CPC may fall by about 1 million BPD while the repairs are being made.