What will Western industry be like without Russian oil? Wsj report
Is a world without Russian oil possible? Ever since Putin started the war in Ukraine, the energy industry continues to ask this once unthinkable question
As oil prices reach unprecedented levels since before the 2008 financial crisis, the energy industry is asking itself a once unthinkable question: How would it fare if it were to give up Russian oil?
Crude oil prices moved closer to $ 140 a barrel, grain prices jumped and industrial metals rose on Monday, as the war in Ukraine and the West's response threatened to hit supplies of much-supporting raw materials. of the world economy. The surge is based on weeks of gains for commodities and adds to the inflationary pressures that are going through the world economy.
The jump in commodity prices followed a statement last weekend from Secretary of State Antony Blinken that the US and European partners were discussing a ban on Russian oil imports. If implemented [on March 8, President Joe Biden decided to ban imports of Russian oil into the United States, ed ], an embargo would mark a significant change in the West's response to Moscow's war in Ukraine.
Washington and allies have imposed punitive sanctions on Russia's financial system and elite, but have so far avoided energy exports for fear of voter backlash on gasoline and heating bills, the WSJ wrote on March 7.
The change signals a newfound willingness to absorb higher energy costs by politicians on both sides of the Atlantic. “The political calculation is that any dislocation… is a better outcome than delivering that money directly to Moscow,” said Paul Horsnell, commodity research chief at Standard Chartered.
Oilmen have prepared for an immediate disruption of energy markets if Western companies are ordered to ban Russia's oil – the world's third largest producer after the United States and Saudi Arabia – and find alternative supplies.
Brent crude oil futures, the international benchmark, jumped 5.1% to $ 124.11 a barrel and first hit $ 139.13 a barrel, their highest level since the Chinese economy boom. raised commodity markets in 2008. US marker West Texas Intermediate traded 3.4% higher at $ 119.61 a barrel.
Before the war, Russian exports of crude oil and refined products satisfied about 7.5% of the world's oil demand. But after President Vladimir Putin invaded Ukraine in late February, many refiners put their imports on hold. They struggled to find funding and tankers for Russian oil cargoes, and feared reputational damage as well as crude oil sanctions.
The US is far less dependent on Russian energy than Europe, but around 8% of its crude oil and refined products imports came from the country last year. If a ban were imposed, the WSJ wrote, refiners would struggle to find alternative supplies of vacuum diesel and fuel oil, which US refiners turn into gasoline.
The challenge in Europe and the United States could be met by reshuffling the world's oil flows. Europe would buy more crude from the North Sea, West Africa and the Middle East to replace lost barrels.
However, there is little room in the oil markets and shifting demand from one place to another is not easy, notes Amrita Sen, founding partner of the consultancy Energy Aspects.
Oil stocks were running out before the outbreak of the war as demand recovered from pandemic lows. In December, the Organization for Economic Cooperation and Development's commercial oil stocks were 2.68 billion barrels, according to the International Energy Agency, their lowest level in seven years.
The US government and its allies are releasing crude from strategic reserves to tame prices and are also looking for adversaries for alternatives to Russian oil. The Biden administration is trying to ease oil sanctions on Venezuela, the WSJ reported Sunday. Talks on the revitalization of the Iranian nuclear deal, meanwhile, have closed on a deal that could unlock Iranian oil for export.
Up to 800,000 barrels per day of Russian Ural crude oil continued to flow to Europe via the Druzhba pipeline. The Soviet-era pipe carries crude oil to refiners in Germany – Europe's largest economy – as well as to Poland, Slovakia, Hungary and the Czech Republic. These countries would face the greatest difficulties in the event of a ban, analysts said.
"If there is an oil sanction, Druzhba will not flow and it will not be possible to replace those pipes," Sen said.
Central European refiners on the southern section of the Druzhba pipeline, such as those operated by the Hungarian Mol group, could import oil from the Adria pipeline. The pipeline starts on the Croatian coast and has been renovated in recent years to strengthen energy security in the region. The Urals are moderately heavy and sulphurous, which means they can be replaced by crudes such as Arab Medium, produced in Saudi Arabia, and most crudes produced in Iraq.
Refiners in China and India, meanwhile, may be able to grab some Russian oil at bargain prices. However, there is a limit to the amount of Russian oil that Asia can buy. Shipments from Russian ports to India are logistically difficult and the region's refineries are not prepared to work with the Urals.
China has never imported more than 500,000 barrels a day from the Urals, according to Sen. If it were to buy all Russian crude headed for Europe before the war, China would have to take another 2.7 million barrels a day – an unrealistic prospect. Indian refiners, meanwhile, are demanding that Russian and Kazakh oil be sold on a delivery basis, illustrating the difficulty they face in finding financing, insurance and tankers for the cargoes.
Complicating the picture: several Russian refineries have closed in recent days because they ran out of storage, traders said. Highlighting the difficulties Russia has in selling its oil, they said Russian Sokol crude was offered at an unusual $ 14 a barrel discount over the benchmark Brent on Monday.
Whether oil prices, already increased by 60% in 2022, will remain at these high prices or rise further depends largely on the response of the Saudi Arabian-led Organization of Petroleum Exporting Countries. The group joined Russia to support oil markets in 2017 and again when crude oil prices plummeted in 2020 after a short-lived price war between Moscow and Riyadh.
Last week, the mixed group, known as OPEC +, proceeded with plans to increase production incrementally, rejecting US calls for a rapid increase in production to tame prices. Analysts said this stance could change if Saudi Arabia and the United Arab Emirates, which have the capacity to pump more oil, fear oil at $ 130 a barrel will affect demand.
"If OPEC wants to stabilize the markets, it can't do it with Russia," Horsnell said. “Russia is the cause of the disruption. Russia is the problem ”.
(Extract from the foreign press review by eprcomunicazione )
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/come-sara-lindustria-occidentale-senza-il-petrolio-russo-report-wsj/ on Sun, 13 Mar 2022 06:01:19 +0000.