While there are alternatives to Russian oil, they will be insufficient or logistically difficult if the United States and its allies ban Russian energy imports, analysts said on Tuesday.
Vandana Hari, founder of energy intelligence firm Vanda Insights, told CNBC “Squawk Box Asia.”
Russia’s war in Ukraine shows no signs of abating US and allies consider banning Russian oil and natural gas imports. Oil prices spiked to a high not seen since 2008, though later shared those benefits. There is also concern that Russia could retaliate by cutting off natural gas supplies to Europe.
To be sure, some Russian capacity could be replaced, Hari said.
Russia exports about 5 million barrels of crude oil per day, according to the International Energy Agency. Of those, Hari said, about 2 million could be replaced if OPEC members Saudi Arabia, Iraq, Kuwait and the United Arab Emirates “can simultaneously stretch themselves to their fullest capacity.”
However, Hari said, a lot of spare capacity within OPEC and its allies, known as OPEC+, is also from Russia.
The problem is that OPEC+ will have to “reopen” their production quota system, and it “doesn’t seem inclined to do anything like that,” she said. Any production cuts or increases by OPEC+ countries are measured against a baseline – the higher that number, the more oil that country is allowed to pump.
Mayor Regina, KPMG’s energy and natural resources industry leader, also added that OPEC+ has been “extremely disciplined in the way they bring crude back to the market.”
“There are other oil supplies,” she told CNBC on Tuesday. “It’s really questionable how quickly they can get online, the logistics to get them where they’re really needed.”
Elsewhere, the US is also said to be in discussions with Venezuela to lift sanctions on its oil, as the country offers alternatives to Russia.
But even if those sanctions were lifted, Hari said that would only free up 100,000 more barrels a day from Venezuela – “certainly nothing will be able to offset the Russian supply disruption. “
Russia is the world’s third largest oil producer after the US and Saudi Arabia. It is also largest crude oil exporter to the global market and is the leading supplier of natural gas to the European Union, about 43%.
Last week, Europe’s energy chief told CNBC The EU has a contingency plan in case Russia cuts off gas supplies to the bloc. The EU has repeatedly talked about the need to diversify its suppliers, but that has not materialized. Now, with Ukraine waging war on its eastern flank, the European Commission, the EU’s executive body, says it wants to finally end its dependence on Russia.
– Silvia Amaro of CNBC contributed to this report.
