Rising Tensions as Russian oil ban by the EU Date Draws Nearer

As December 5 draws nearer, the day set by the European Union to ban seaborne imports of Russian crude oil, tensions are rising from different quarters on the ripple effects of the sanction.

Although the total ban on petroleum product imports would not be enforced until February 5, 2023, it remains unclear at the moment if sufficient provisions have been made.

There are several speculations about how this would affect oil prices. At the moment, China and India have greatly increased the purchase of their oils bought from Russia, which is helping Russia cushion the effect of the sanction from the EU.

What is Europe’s energy backup plan?

In the past few months, Europe has been importing more oil from the United States, West Africa, and the Middle East, instead of Russian oil, while some volumes are still gotten from Russia while the sanction deadlines are fast approaching.

To comply with the Dec. 5 ban, that replacement process must rapidly accelerate in the coming weeks.

Kpler's data shows that EU imports of Russian crude dropped from 2.6 million barrels per day in January to 1.5 million barrels per day in September. These volumes are expected to zero From Dec. 5, while importation would increase from substitute countries.

Kpler is the leading intelligence solutions provider for commodity markets that collect, process, and forecast an unparalleled set of commodity inventories, flows, and freight data with the broadest coverage across industries.

Kpler reported that the reduction in Russian short-haul crude flows to the EU between January and September reduced tanker demand by 11 billion ton-miles, while it imported 35 billion ton-miles during the same time frame from the replacement sources (US, West Africa & Middle East).

How can the Nigerian energy sector benefit from this?

Amongst several other regions that Europe is looking to as a substitute for its oil, Nigeria is one of the leading producers of oil they have been purchasing from. This demand would place an increase in the demand for our oil; thereby, creating an opportunity to sell more, all things being equal, if factors of oil theft are addressed.

This would have also been an opportunity for Nigeria to gain more by increasing prices; however, being a member of OPEC+ regulates prices and output.

From another perspective, measures must be put in place to monitor oil theft, as the increased demand might create tension for cartels in the energy sector to find means to get oil from us from unofficial quarters.

As the time draws closer, let’s keep our fingers crossed to see how events unfold.

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