Oxford Institute for Energy Studies’ Post

New Oxford Institute for Energy Studies presentation: Russia’s invasion of Ukraine and implications for global oil markets by bassam fattouh Key highlights: 🔹 Russia is one of the world’s largest crude oil producers and exporters, with flows of crude and products from Russia having global reach. In February 2022, Russia’s oil exports totaled 7.6 mb/d of which 4.6 mb/d amounted in crude exports and 3 mb/d in product exports. Europe lifted the bulk of these flows accounting for 64% of total Russian exports, followed by Asia with 22% 🔹 Based on current exports data, we consider a full curtailment scenario in which 85% of Russia’s crude exports are at risk till May 2022, with March scheduled crude shipments currently down by 23% m/m to 3.6 mb/d from 4.6 mb/d in February, while in April scheduled shipments fall to 1 mb/d, down by 77%. We assume the loss of another 0.4 mb/d associated with a complete halt of exports to Europe and the Americas that brings the curtailment between February and May 2022 at 4 mb/d 🔹At its peak impact the full curtailment scenario can push prices up to $150/b, with the price pressure persisting throughout 2022 (amplified by significant product markets challenges) before retreating in 2023 to pull prices in the $100/b and $110/b range year-end as supply/demand responses are expected to be fully priced in 🔹In the short term, potential responses to ease the price pressure would come from the supply and demand side. The current plan of OPEC+ to return withheld supplies back to market, Iran potentially fully returning to the market and non-OPEC production growth particularly in North America accelerating, these combined supply responses can help fill any potential supply gap. The planned SPR releases will offer little support to a potential shortfall. But in such scenario the demand responses play an important role and become more visible beyond the near-term 🔹The supply/demand responses under a full curtailment scenario are expected to provide little relief in 2022 shaving off only some $6/b from the annual price to draw prices closer to $120/b by year-end. A material impact is expected in 2023, where the supply/demand responses could offset $18/b of the price increase on annual terms and prices could return below $100/b on a sustained basis from Q2 2023 onwards #russiaukraine #sanctions #oilmarkets #oilprices #opec #shale