With a significant loss of global oil supply in the offing due to sanctions imposed on Russia, the West - and the rest of the world too - are scrambling for alternatives in order to keep the impending supply squeeze at bay.
The IEA, International Energy Agency, is predicting that that Russia will lose a quarter of its oil exports in the next few months.
“The implications of a potential loss of Russian oil exports to global markets cannot be understated,” said the IEA on Wednesday, adding, “while it is still too early to know how events will unfold, the crisis may result in lasting changes to energy markets.”
IEA, Russian crude and oil product exports, Jan 2020-Dec 2021, IEA, Paris https://www.iea.org/data-and-statistics/charts/russian-crude-and-oil-product-exports-jan-2020-dec-2021
With these developments, the highly anticipated days of surplus crude oil, forecast by the OPEC+ and of course, the IEA as well, last year, in the markets have vanished into thin air. On the contrary, the global crude oil stocks, according to various reports, are at its lowest since 2014.
The OPEC+ and the IEA, meanwhile, see eye to eye on the inevitable issue of the inflation that in turn brings the demand growth down due to high energy prices.
In this context, it is understandable why the Western leaders are scrambling for alternatives when the oil prices go through the roof at the pumps while pushing the cost of living on an upward spiral.
For instance, Boris Johnson, the British prime minister, is already in the Middle East in order to ask the UAE and Saudi Arabia to increase the output; it is widely reported in the media that President Biden made a similar attempt on the phone to reach out to the two leaders in question, but to no avail.
It is well known that the UAE and Saudi Arabia are reluctant to increase the production in order to meet the Western demands, while stubbornly sticking to the collective agreements made at the monthly meetings of the OPEC+; they just want to increase the daily output by over 400,000 bpd - a drop in the ocean in the current circumstances.
Moreover, the two Middle Eastern bigwigs do not appear to be prepared to upset Russia in its hour of need either.
Despite the obvious doom and gloom, there are some encouraging signs emerging from the talks involving the signatories to the JCPOA, 2015 Iranian nuclear deal.
With the arrival of Nazanin Zaghari-Ratcliffe, the British-Iranian woman who had been in Iranian jail for six years, Britain and Iran have managed to normalize the relations between the two countries that ultimately helps the talks on the JCPOA move forward smoothly in the right direction.
The US shows tangible optimism too. The position of the Republican lawmakers, however, is still a major concern, because Iran insists on reaching an agreement that does not change from administration to administration.
If the JCPOA can be revived successfully, it will certainly address the supply woes that currently confuse the crude oil markets.
If Iran pumps too much in order to compensate for the losses it suffered due to crippling US sanctions, it may not go down well with the key members of the rest of the OPEC+, though. It may potentially cause a major rift between Iran and the UAE and Saudi Arabia, clearly polarizing the organization.
In this context, the stakes cannot be higher for the OPEC+ , when one of its key member is corned into international isolation due its involvement in the war in Ukraine.
