Sanctions on oil-exporting countries could push up crude prices but the effect will be limited because of surplus capacity, the International Energy Agency Executive Director Fatih Birol said on Tuesday.
Global oil prices jumped more than 7% last week with Brent futures trading at $65 per barrel after U.S. President Donald Trump hit Russia’s Rosneft and Lukoil with sanctions to pressure Russian President Vladimir Putin to end the Ukraine war.
While sanctions could push prices upward, the effect is limited with oil prices holding at around $60 due to a huge amount of surplus capacity, Birol told reporters on the sidelines of the Singapore International Energy Week.
The sanctions prompted Chinese state oil majors to suspend Russian oil purchases in the short term, trade sources told Reuters. Refiners in India, the largest buyer of seaborne Russian oil, were set to sharply cut Russian crude imports, industry sources said.
However, the Organization of the Petroleum Exporting Countries and their allies, also known as OPEC+, is leaning towards a modest output boost in December, four sources familiar with the talks said.
“Today, despite so many political tensions around the world, Middle East, Russia, Ukraine, major economic, trade wars, oil prices are still $60, exactly what we said,” Birol said
“The oil and gas markets will enter a very distinct period, which is in the absence of major geopolitical tensions, we are going to see lower oil and gas prices.”
About 300 billion cubic metres of new liquefied natural gas supply will be entering the market between 2026 and 2030, of these half will be from the U.S., Canada, Australia and Qatar, Birol said.
He also expects coal to remain a part of the solution for skyrocketing electricity demand in the region in the next 10 years, which could see ASEAN requiring additional electricity of 300 gigawatts, equal to one Japan.
Birol also called on Asian countries to mine and process critical minerals to diversify supply.
The United States signed a flurry of deals on trade and critical minerals with four Southeast Asian partners on Sunday, looking to address trade imbalances and diversify supply chains amid tighter export curbs on rare earths by China.
“To mine them, but more importantly, to refine and process them, because just mining and… export it as it is, is a lazy approach,” Birol said.
(Reporting by Florence Tan and Siyi Liu; Editing by Tony Munroe, Christian Schmollinger and Stephen Coates)