Oil prices have remained high since Russia invaded Ukraine in March.
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Oil prices were slipping on Tuesday, even as the head of the International Energy Agency warned that the worst of the energy crisis is still to come.
“The world has never witnessed such a major energy crisis in terms of its depth and its complexity,” said Fatih Birol, IEA executive director, at the Sydney Energy Forum.
“I believe we may not have seen the worst of it yet,” he added, saying that the global squeeze on oil could continue to have repercussions around the world well into the end of the year.
Global oil prices skyrocketed after Russia invaded Ukraine in February. Brent crude, the global benchmark, reached an intraday trading high of $139.13 a barrel in March, just under its all-time record of $147.50 on July 11, 2008.
While the invasion has not yet resulted in a loss of oil supply to the market, according to the IEA, prices have remained high over the last few months. A barrel of Brent crude has oscillated close to $100 a barrel as Western allies imposed sanctions on Russia, cutting off the world’s third largest oil producer from key markets.
Oil prices were slipping on Tuesday, however. Brent was down 6.8% to $99.87 and West Texas Intermediate, the U.S. benchmark, was down 7.3% to $96.50.
“Recession fears are increasingly driving these markets and that’s one reality that could limit the rise in oil prices over the medium term,” wrote Craig Erlam, senior market analyst at OANDA. “The prospect of further Covid restrictions in China is a near-term headwind for crude prices, also.”
President Joe Biden is scheduled to visit Saudi Arabia later this week, which has led to speculation that he will ask the OPEC de facto leader to ramp up oil production in a bid to ease the strain on oil prices. Biden may also ask Middle Eastern leaders to redirect oil exports to Europe, one analyst predicted, as the region will likely begin to feel the pinch.
“This winter in Europe will be very, very difficult,” Birol said on Tuesday.
Before the invasion, about 60% of Russia’s oil exports went to Europe. That’s changed now that the 27-member bloc has pledged to phase out 90% of Russian imports by the end of the year.
The European Union’s decision won’t be a painless one for its member countries. In 2020, almost 30% of crude oil imports came from Russia, according to the European Commission. Already, Italy and Austria have reported that Russia was tightening natural gas supplies in retaliation for the EU’s decision to phase out Russian oil.
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