"Impact of sanctions on oil prices limited" - IEA: Excess production capacities will stabilize the global market
Sanctions against oil-exporting countries could boost prices, but the effect remains limited due to excess production capacity, said Fatih Birol, executive director of the International Energy Agency (IEA).
Last week, global oil prices rose more than 7%, with Brent crude trading around $65 a barrel, after US President Donald Trump imposed sanctions on Russian companies Rosneft and Lukoil. The move is aimed at increasing pressure on Russian President Vladimir Putin to end the war in Ukraine.
However, Birol stressed that the impact of sanctions on the oil market is limited, as major producers still have large unused capacities. “Sanctions can push up prices, but due to the large amount of oil that can be quickly placed on the market, prices are being held around the $60 per barrel level,” he said.
According to trade sources, Chinese state-owned oil companies have temporarily suspended purchases of Russian oil, while Indian refiners, the largest buyers of Russian oil transported by sea, are expected to significantly reduce their imports.
On the other hand, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, are considering the possibility of a slight increase in production in December. "Despite the numerous geopolitical tensions in the world, such as in the Middle East, Russia, Ukraine or trade wars, the price of oil remains around $60 per barrel, exactly as we had predicted," Birol stated.
According to him, the oil and gas markets are entering a new period, where in the absence of major political tensions, oil and gas prices are expected to be lower. He added that between 2026 and 2030, about 300 billion cubic meters of liquefied natural gas (LNG) is expected to enter the market, half of which will come from the US, Canada, Australia and Qatar. Birol also underlined that coal will remain an important part of the electricity supply in the Asian region for at least the next ten years.
Meanwhile, in his speech, Birol called on Asian countries to invest more in the extraction and processing of critical minerals, which are essential for the production of green technologies, batteries and wind turbines. According to him, diversifying the supply chains of rare earth minerals is vital for energy security. In this regard, the United States signed a series of trade and critical minerals agreements with four Southeast Asian partners, to reduce dependence on Chinese suppliers and balance the trade deficit.
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