Oil Producers Don’t Have Capacity To Replace Supply From Russia, Says OPEC

The Organisation of Petroleum Exporting Countries has stated that the loss of crude oil and other liquids exports of more than seven million barrels per day from Russia could not be replaced.

This is just as the Organisation has revised the demand for crude oil in 2022 downward following the concerns around global economic growth.

OPEC’s Secretary-General, Sanusi Barkindo, announced this at the 62nd Meeting of the Joint Technical Committee via videoconference.

He said, “Global oil demand growth for 2021 remains similar to last month, at 5.7 million barrels per day, but 2022 growth has been revised down by 0.5mb/d to stand at 3.7mb/d. This mostly reflects the downward revision in world economic growth.

“On the supply side, non-OPEC supply growth in 2022 has been revised down by 0.3mb/d to 2.7mb/d, mainly on the back of a downward revision for Russia.”

Barkindo noted that given the uncertainties on the supply side, and that OPEC-10 crude oil spare production capacity stood at around 3.3mb/d, or roughly 3.3 per cent of global demand, it was positive to hear last week that the Caspian Pipeline Consortium was set to resume full exports after almost 30 days of disruptions following repairs on one of its key loading facilities.

“The CPC pipeline carries around 1.2mb/d. In terms of the Declaration of Cooperation and the production adjustments, the latest data shows that our conformity levels reached 157 per cent in March, and stand at 113 per cent overall since May 2020,” he stated.

The OPEC scribe added that as of March 2022, participating countries were producing 2.37 million barrels more on a daily basis than in August of 2021.

“Some countries continue to produce under their agreed levels, with the shortfall at 1.45mb/d in March.

“The spare capacity just does not exist, however, its potential loss, through either sanctions or voluntary actions, is clearly rippling through energy markets.

“The crises we face are causing huge volatility, with daily price swings of more than $5/b occurring on 13 occasions across March and April.”

Meanwhile, the prices of crude oil rose by four per cent, after the European Union unveiled plans to phase out imports of Russian oil as part of sanctions for Russia’s invasion of Ukraine.

Brent crude futures rose $3.99, or 3.8 per cent, to $108.96 a barrel by 1121 GMT. West Texas Intermediate crude futures rose $4.05, or 4 per cent, to $106.46 a barrel, Reuters reported.

The development came immediately after the European Commission, President Ursula von der Leyen, proposed a phased oil embargo on Russia over its war in Ukraine, as well as sanctioning Russia’s top bank, in a bid to deepen Moscow’s isolation

“Crude oil supply would be phased out within six months, and imports of refined oil products by the end of 2022.”