Who will step in to make up for this huge supply shortage? And will there be enough? Will the EU enter a fuel crisis? These are questions asked by Bloomberg.
The EU imported about 220 million barrels of oil from Russia last year, according tovortexa data compiled by Bloomberg. Oil is a very important fuel for the EU economy, providing energy for cars, trucks, ships, construction and production equipment...
Replacing Russia's 220 million barrels of oil - equivalent to 14,000 Olympic-sized swimming pools filled with oil - is a major challenge.
In 2021, more than half of the oil transported by sea to the EU and the UK - which already has a ban - was from Russia. By December last year, that share had fallen to about 40%, partly due to increased imports from Saudi Arabia and India.
Looking ahead, there is reason to believe that oil from other places could partly compensate for Russian oil.
Eugene Lindell of consulting firm Facts Global Energy said that lost Russian supplies will be replaced, but it is difficult to fully guarantee them.
Suppliers
The clearest place where Europe could get more oil is the Middle East, because of its close geographical location. Especially for countries bordering the Mediterranean - of course the premise that the Suez Canal is not blocked - and there are new huge refineries about to operate to handle millions of fuel barrels.
Abu Dhabi National Oil and Gas Company agreed to supply oil to Germany. India and the US - both long-term suppliers to the EU - have increased exports in recent weeks. US refineries are expected to produce a record amount of distillate products this year, including diesel used for trucks and cars.
But the most important potential supplier, although indirect, could be China.
Chinas policy is a game-changer, said Mark Williams, research director at Wood Mackenzie. This country holds the key to all the surplus refining capacity globally.
Oil exports from China have increased significantly in recent months. Although only a small part of these are in Europe, it has also helped increase supply in the region.
China's first fuel export turnover for 2023 has increased by nearly 50% compared to the same period last year, making it difficult for oil volumes to fall back to the low level in early 2022.
Williams said that China's oil exports could reach 400,000 to 600,000 barrels/day in the first half of this year - the same amount that the EU and the UK lost to Russia.
There has been a complete change in oil trade flows since the beginning of February, Mr. Williams said. However, it is important to note that China sometimes chooses to prioritize environmental protection over profits from fuel exports, and this country can do it again.
Potential problems
The potential concern is whether EU sanctions could make Russian oil barges completely disappear from the global market.
What if Russia cannot find enough new buyers outside the EU for its fuel? If Russia cuts production, it could lead to tightening global supply, and pushing oil prices higher. Eugene Lindell predicted that Russian oil production will decrease in February and March.
Even with many buyers ready, taking oil out of Russia could be a challenge. Many owners will be wary of violating Western sanctions which stipulates that oil prices must not be higher than the price cap that the G7 is discussing.
That mechanism and the price cap itself - for crude oil at $60/barrel - have not yet been set for Russian oil. At the end of last year, the Russian oil valuation agency Argus Media valued Russian oil at $926/ton (about $124/barrel), down from the world oil price of $30/ton (about $4/barrel).
If the upcoming price ceiling is much lower than the market price, most of the global tankers will not be able to continue to unload and transport Russian goods if they want to access G7 services such as insurance.
Demand
The downside of any question about whether the EU will have enough oil in the future is: how strong will demand be?
Recent warm weather in Europe has certainly helped, potentially reducing heating consumption and reducing gas prices. In theory, this will help refineries produce higher quality oil at a cheaper price and also reduce measures to encourage businesses to use gas instead of oil for power generation.
Benedict George - market reporter at Argus - said that the macroeconomic recession is gradually reducing Europe's oil demand. Data from each country shows that European oil demand has decreased by at least 5% compared to the same period last year. During the 2008 recession, oil demand fell about 10% compared to the same period in 2007 at the lowest level.
