Looming European Union bans on seaborne exports of Russian crude oil and products along with a G7 price cap on those sales will create unprecedented uncertainty for oil markets already beset by high prices and deep economic challenges, the International Energy Agency said on Tuesday.
“The approaching EU embargoes on Russian crude and oil product imports and a ban on maritime services will add further pressure on global oil balances, and, in particular, on already exceptionally tight diesel markets,” the Paris-based energy watchdog said in its monthly oil report.
“A proposed oil price cap may help alleviate tensions, yet a myriad of uncertainties and logistical challenges remain… the range of uncertainty has never been so large.”
The EU will ban Russian crude imports by Dec. 5 and Russian oil products by Feb. 5, depriving Russia of oil revenues and forcing one of the world’s top oil producers and exporters to seek alternative markets.
A G7 plan intended as a carve out to the full EU embargo will allow shipping services providers to help export Russian oil, but only at enforced low prices, is also set to take effect on Dec. 5.
Russian oil output will fall 1.4 million barrels per day (bpd) next year as buyers shun their supplies, the IEA added.
The EU bans mean that the bloc will need to replace 1 million bpd of crude and 1.1 million bpd of oil products, the IEA said, with diesel especially scarce and expensive.