BAKU, Azerbaijan, April 15. The risk of large disruptions in Russian oil rises in Q2, as a prolonged war raises the risk of bigger-than-anticipated disruptions, even in the absence of direct oil and gas sanctions, on self-sanctioning and operational constraints deepening, Trend reports with reference to the Oxford Institute of Energy Studies (OIES).
“Uncertainty over the actual Russian oil lost however remains high, but the first tentative signs of disruption are starting to emerge such as a notable increase in Russian crude-on-water and floating storage, cuts in Russian refining runs and lack of storage. OPEC+ is sticking to the current agreement of lifting its monthly increments to 0.432 mb/d between May and September 2022, planning to return on paper 2.1 mb/d. Capacity constraints for most OPEC+ producers are expected to halve the OPEC+ response relative to their pledged target with replacement barrels in our Reference averaging 1.3 mb/d between April and September 2022, relative to the headline 2.5 mb/d. Iran nuclear deal talks face high uncertainty, but we still expect Iran to ramp up production in H2 and reach 3.6 mb/d by year end,” reads the OIES report.
Outside OPEC+, US crude growth in the Full curtailment case reaches 1.2 mb/d in 2022 and only 0.6 mb/d in 2023, compared to OIES reference 1 mb/d and 0.5 mb/d, respectively.
“Overall, non-OPEC crude supply could add an additional 0.7 mb/d by 2023, with NAM accounting for more than 75 per cent of the total non-OPEC supply response. Overall, replacing big losses of Russian supplies under the Full curtailment case remains extremely challenging. That said, replacement crude could fill the gap by year end, but severe near-term pressures persist between April and October 2022. The decision to release 240 mbbls from SPR between May and October 2022 would ease some of the near-term pressure on balances, but the impact on prices appears to be shortlived and largely dependent on the size of the supply shock,” the report says.
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