Opec tells EU that Russia oil crisis is beyond its control

Opec's secretary-general said that markets are being swayed by political factors rather than supply and demand. PHOTO: REUTERS

NEW YORK (BLOOMBERG) - Opec's top diplomat told European Union officials that the current crisis in global oil markets caused by Russia's invasion of Ukraine is beyond the group's control.

Russian oil supply losses stemming from current and future sanctions or a boycott by customers could potentially exceed seven million barrels a day, Opec secretary-general Mohammad Barkindo said on Monday (Apr 11).

That would be far beyond the group's capacity to replace, he told EU Energy Commissioner Kadri Simson, who had asserted the cartel's responsibility to balance the market.

Simson said that the oil-producers group could tap its existing spare output capacity to assist in the crisis, according to an Opec document seen by Bloomberg.

Mr Barkindo said that markets are being swayed by political factors rather than supply and demand, leaving little for the organisation to do.

"These crises have compounded to create a highly volatile market," Mr Barkindo said, according to the text of his opening remarks. "I must point out, however, that these are non-fundamental factors that are totally out of our control at Opec."

The two representatives spoke during the regular dialogue between the EU and the Organisation of Petroleum Exporting Countries (Opec).

Opec nations such as Saudi Arabia have rebuffed calls from major consumers like the United States to fill in the gap left by Russia. Besides their view of the market, the kingdom and its allies may have other reasons for holding back.

Riyadh jointly leads an alliance of global producers with Moscow, known as Opec+, and may also be keen to preserve its political ties with the Kremlin, which have helped the Saudis lessen their reliance on the US.

Oil prices continue to trade near US$100 a barrel as many refiners shun Russian supplies following the attack on its neighbour. The price rally has bolstered fuels like diesel, adding to the inflationary pressures and cost-of-living crisis hitting many consumers.

Oil staged a partial recovery as traders weighed China's demand outlook following the easing of some coronavirus restrictions in the financial hub of Shanghai.

Shanghai has eased lockdowns for some housing complexes, but most people remained confined to their homes and the authorities have indicated they will reimpose restrictions if virus cases climb. Oil has now given up almost all its gains since Russia's invasion of Ukraine in late February.

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