Key Highlights:
- Analysts said Tuesday that while there are many alternatives to Russian oil they would not be sufficient or logistically difficult if the U.S. and its allied countries were to ban Russian energy imports.
- Vandana Hari is the founder of Vanda Insights. She said that only some Russian supplies can be exchanged with OPEC members but they would need to “simultaneously extend themselves to their maximum potential.”
- Regina Mayor, KPMG, said that there are many other sources of oil supply. It is just a matter of how fast they can be online and the logistics of getting them there.
While there are alternatives to Russian oil, they would be insufficient or difficult logistically if the U.S. and its allies were to ban Russian energy imports, analysts said Tuesday.
“There’s just no way even OPEC+ and even combined Iran and Venezuela could make up for it,” Vandana Hari, founder of energy intelligence firm Vanda Insights, told CNBC’s “Squawk Box Asia.”
Russia’s war in Ukraine shows no sign of abating as the U.S. and its allies weigh banning Russian oil and natural gas imports. Oil prices spiked to highs not seen since 2008, though later pared those gains. There was also concern that Russia could retaliate by cutting 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 that, Hari said about 2 million could be replaced if OPEC members Saudi Arabia, Iraq, Kuwait and the United Arab Emirates “were able to simultaneously stretch themselves to their maximum capacity.”
Hari stated, however, that a lot the spare capacity in OPEC and its allied countries, also known as OPEC+ is Russian.
The problem is that OPEC+ would need to “reopen” its production quota system. She said it “just doesn’t seem inclined to do any of that kind just yet.” All cuts and increases in OPEC+ country’s output are measured against a baseline. The higher the number, the more oil a country can pump.
Regina Mayor, KPMG’s U.S. sector leader in energy and natural resources, said that OPEC+ is “incredibly disciplined about how they return crude oil to the market.”
However, there are many other sources of oil supply. She said Tuesday that it was just questionable how fast they can be online and the logistics of getting them there.
The U.S. is also believed to be in talks with Venezuela over lifting sanctions on its oil. Venezuela has alternative sources to Russia.
Hari stated that even if the sanctions were lifted, it would only allow Venezuela to export 100,000 barrels per day. “Certainly nothing that would be able to offset the disruption in Russian supplies.”
Moreover, Russia is third-largest oil producer in the world, after the U.S.A and Saudi Arabia. It is also the largest exporter of crude oil to global market and the top supplier of natural gas for the European Union with 43%.
CNBC was informed last week by Europe’s energy chief that the EU has a contingency program in place in case Russia cuts off its gas supply. The EU has been repeatedly promoting the need to diversify its suppliers. However, that has yet to materialize. The European Commission, which is the executive arm of the EU, stated that it wanted to end Russia’s dependency in the face of the war in Ukraine.
— CNBC’s Silvia Amaro contributed to this report.
