Western sanctions on Russia and Iran are leading to unprecedented oil storage levels on vessels, as reported by Gunvor Group’s CEO, Torbjorn Tornqvist, during the ADIPEC energy conference in Abu Dhabi. These sanctions, enacted by the EU, UK, and US in response to Russia’s actions in Ukraine, notably target major oil producers like Rosneft and Lukoil. Tornqvist noted that while there is a surplus of oil that mitigates trade disruption impacts, a significant amount remains dislocated on tankers.
The sanctions have altered market dynamics, preventing a potential oversupply, but Tornqvist emphasized that if these sanctions were lifted, global markets could face a substantial oversupply. Despite fears of oversupply leading to price declines, Tornqvist indicated that inventory levels remain low while oil stored at sea is high, suggesting a gradual buildup of supply that could enter the market in the near future.
Additionally, Mercuria’s CEO, Marco Dunand, highlighted possible outsized supply exceeding demand by 2 million barrels per day next year, although he acknowledged that Western sanctions remain a variable affecting supply levels. This ongoing situation reflects complex market tensions driven by geopolitical factors and production increases from OPEC and non-OPEC nations alike.
