Why is it difficult for the Middle East to save Europe if Russian oil is cut?

Western nations have imposed a series of sanctions on Russia because of the conflict in Ukraine, but the European Union has not stopped importing its oil and gas even though it is Moscow’s main source of revenue. . The simple reason is that the West still wants to avoid hurting its own economy because of its dependence on Russian oil and gas.

According to the International Energy Agency, a potential EU ban on Russian oil could result in a shortage of 2.2 million bpd of crude oil and 1.2 million bpd of petroleum products. according to the International Energy Agency.

According to CNN, if Russia’s abundant oil supply is cut, one question is who has the technical ability, and importantly, is ready to “rescue” Europe?

Although the countries of the Middle East hold almost half of the world’s oil reserves and most of its spare production capacity, the region cannot “save” Europe for a number of reasons such as a lack of investment. infrastructure, sanctions, ongoing conflicts as well as the “sensitivity” of political alliances…

Saudi Arabia and United Arab Emirates

The two countries have a large share of OPEC’s available spare capacity, at about 2.5 million barrels, said Amena Bakr, an expert on the Organization of the Petroleum Exporting Countries (OPEC) at Energy Intelligence. /day.

However, OPEC’s largest producer, Saudi Arabia, has repeatedly rejected US requests to increase output beyond the quota agreed with Russia and other non-OPEC producers. Nor did Saudi Arabia heed Europe’s call to increase production.

Oil shipments in the Gulf could be diverted from Asia to Europe, analysts say, but that would jeopardize the growing strategic partnership between the region and The main buyer is China.

Iraq

In theory, Iraq could pump another 660,000 bpd, said Yousef Alshammari, CEO and head of oil research at CMarkits in London.

The country is currently producing about 4.34 million bpd of oil and has a maximum production capacity of 5 million bpd, he said.

However, the factional divisions and political deadlock in Baghdad mean that Europe cannot rely on Iraq to “get through”.

Iraq also lacks the infrastructure to raise output, analysts say, and investing in oil projects could take years before it pays off.

Libya

Operations at Libya’s oil fields are regularly disrupted due to continued political tensions. At the end of April, the National Oil Corporation (NOC) said the country had lost more than 550,000 bpd of oil as political dissident groups blocked oil fields and the country’s main export port. An oil refinery was even damaged after armed clashes.

Mr Alshammari said it was “almost impossible to rely on Libya” to “rescue” Europe because some of its manufacturing activities had been shut down for years due to political instability and repeated blockades. repeat for important oil fields.

Iran

After the UAE and Saudi Arabia, Iran is considered the most likely to add oil to the market, but the country is still under US sanctions amid negotiations to restore the nuclear deal. 2015 with world powers still stalling.

The country could contribute up to 1.2 million bpd of oil if US sanctions are lifted, analysts say. Data firm Kpler estimates that Iran had 100 million barrels in floating storage as of mid-February, meaning the country could add 1 million bpd, or 1% of global supply, in about three months.

However, the US does not have the ability “to sign an unfavorable agreement with Iran just to put more oil on the market”, Mr. Bakr commented.

Countries outside the region

Countries outside the Middle East have the ability to supplement the market’s shortfall, including Nigeria and Venezuela, but these two countries are also facing their own problems.

According to CNN, Europe also has a potential option, the US. But even if the US pumps more oil to Europe, it will not be enough and not suitable for Europe’s needs because US crude oil is very light.

“U.S. crude is not ideal for the European market and is not meant to be used to make more diesel,” Mills said.