IEA Anticipates World Coping with Decreased Russian Oil Supply, According to Reuters

By Noah Browning

LONDON (Reuters) – The International Energy Agency (IEA) stated on Thursday that global oil supplies will remain stable despite the reduced output from sanctions-affected Russia. This announcement follows the agency’s revised forecasts for supply losses from the second-largest oil exporter for the second consecutive month.

The IEA now estimates that losses reached 1 million barrels per day (bpd) in April, a decrease from the previous month’s prediction of 1.5 million bpd and a significant reduction from the 3 million bpd forecast in March. This decline is attributed to various refiners in Europe opting out of Russian crude ahead of a forthcoming import ban.

Increased production in other regions and a slowdown in demand growth, particularly due to lockdowns in China, are expected to prevent a significant deficit, according to the IEA.

"In the long term, steadily rising volumes from Middle East OPEC+ and the U.S., coupled with a deceleration in demand growth, should mitigate the risks of an acute supply deficit amid ongoing disruptions from Russian exports," the IEA noted in its monthly oil report.

This assessment implies that the economic repercussions of additional sanctions on Russian energy, which are currently being considered by the European Union, may not be as severe as anticipated.

The agency predicts that soaring fuel prices combined with a slowdown in economic growth will substantially hinder the recovery in demand for the remainder of 2022 and into 2023, with the ongoing COVID-19 restrictions in China contributing to prolonged economic stagnation.

Reflecting slower export volumes and diminishing domestic demand, approximately 1 million bpd of Russian oil was shut in last month, which is about half a million bpd less than previously forecasted by the agency. The IEA forecasts that this figure will rise to 1.6 million bpd in May, reaching 2 million in June, and nearly 3 million bpd from July onward if sanctions deter further purchases or are intensified.

In response to the situation, the United States and other IEA member countries have committed to releasing 240 million barrels of oil from their emergency reserves, marking the second such release this year. This follows the IEA’s decision to refrain from participating in a U.S.-led release in November, at which point no significant supply disruptions were foreseen.

Russian oil exports rebounded in April, rising by 620,000 bpd to 8.1 million bpd compared to March. This brought exports back in line with January-February averages, largely benefiting from rerouting supplies away from the U.S. and Europe toward India.

As the EU progresses with plans to ban Russian oil, it remains the largest market for these exports, with a reduction of only 535,000 bpd from the beginning of the year. The bloc now accounts for 43% of Russian oil exports, down from approximately 50%.

(Note: This story clarifies that the IEA indicated in April that the risk of a sharp deficit in global oil markets had decreased.)