The global oil market is heading for a major disruption.
Dozens of nations, including the US and much of Europe, say they are united in seeking to “radically” reduce imports of Russian oil and gas after its invasion of Ukraine, while ensuring those efforts don't fuel climate change.
At a two-day meeting of the International Energy Agency (IEA), chaired by US energy secretary Jennifer Granholm, governments floated a raft of ideas to cut energy use, tap new supplies of gas, oil and coal beyond Russia, and ramp up the use of renewable power.
The executive director of the IEA, Fatih Birol, said member countries were pursuing separate energy policies, but with “one single target: reducing, radically, Russian oil and gas imports”.
Oil may even surpass $200 a barrel, top traders warned. Sanctions on Russia and a lack of alternatives could lead to the loss of millions of barrels a day in crude that won’t be replaced anytime soon, industry executives said at a Financial Times conference. “Wakey, wakey,” Pierre Andurand, a prominent oil trader said. “We are not going back to normal business in a few months.”
On Thursday, Opec sources said a possible European Union ban on oil from its partner Russia over the invasion of Ukraine would hurt consumers and the oil cartel has conveyed its concerns to Brussels.
Major Opec members, such as Saudi Arabia and the United Arab Emirates, have tried to navigate a neutral course between the West and Moscow, while OPEC+, a grouping that includes Russia, has steered clear of the Ukraine issue in its policy meetings.
The EU, which relies heavily on Russian crude, has already imposed tough sanctions on Russia, including freezing its central bank's assets. The bloc has been discussing whether and how to put sanctions on Russia's energy industry.
Russian President Vladimir Putin on Wednesday ushered in the portents of deep turmoil in the global energy markets. Putin said Russia, the world's largest natural gas producer, will soon require “unfriendly” countries to pay for fuel in roubles, raising alarm about a possible gas crunch in Europe.
Gas buyers are seeking guidance on how such payments could be made, given that Russia and swathes of its companies are under sanction for the Kremlin's invasion of Ukraine.
German utilities on Thursday said their country needed an early warning system to tackle gas shortages, a day after Russia ordered the switch of contract payments to roubles, raising the risk of a supply squeeze and even higher prices.
Putin’s rouble payment demand, which IEA executive director Fatih Birol called a “security threat”, added to market nervousness and calls into question Russia’s historic claim it is a reliable gas supplier regardless of geopolitics.
