Russia’s invasion of Ukraine and its global repercussions have put major strains on oil markets but recent action by International Energy Agency member states to release unprecedented amounts of oil from emergency reserves has helped reduce the risk of a sharp deficit that would cause major economic disruption.

Following an initial agreement on 1 April, the volume committed to date stands at 120 million barrels, making it the largest stock release in IEA history and almost double the previous record release that was agreed on 1 March shortly after Russia’s invasion. The United States will contribute about 60 million barrels to the new release, part of the larger drawdown from its Strategic Petroleum Reserve that it announced on 31 March. 

The collective action by IEA member countries comes as the volume of Russian oil reaching international markets continues to slide. In early April, Russian production had dropped by 700 000 barrels a day, with the decline likely to reach 1.5 million a day by the end of the month as sanctions continue to bite, and then around 3 million a day from May, according to IEA’s latest Oil Market Report. 

Benchmark crude prices remain troublingly high and are a serious threat for the global economic outlook. This underscores the need for efforts by governments and citizens to use less energy in order to save money and reduce reliance on Russian fossil fuel imports, as highlighted in IEA’s recent ‘10- Point Plan to cut Oil Use’.

Demand for natural gas in decline

Gas as well as oil markets have been shaken by the consequences of the invasion of Ukraine. The war has pushed up prices and caused disruptions in natural gas markets, resulting in a significant downward revision in IEA’s forecast for the world's demand for natural gas in 2022.

In early January, IEA’s quarterly report estimated that global natural gas demand was set to grow by 40 billion cubic metres in 2022, but a new update published on 1 April cut that forecast severely and now projects that global demand will fall by 10 billion cubic metres this year. Gas prices on spot markets have soared to record levels – several times their average level in recent years – as Europe’s push to diversify its supplies away from Russia has intensified demand for liquefied natural gas (LNG) cargoes.