- The amount of Russia oil missing from the market will probably double in May, BP's CEO said Tuesday.
- Bernard Looney expects 2 million barrels a day to disappear as existing sanctions kick in this month.
- The EU is preparing to step up sanctions with a proposal to ban Russian oil, but faces pushback from Hungary.
Bernard Looney predicted the coming drop-off in comments to Reuters after the company's quarterly results on Tuesday, as the EU prepares fresh measures on Russian oil.
"There is one million barrels a day of Russian crude off the system today… We think that will probably double this month, when existing sanctions come into effect," Looney told Reuters.
Looney added BP doesn't expect any "let off" in oil prices and market volatility soon, given the drop in volumes reaching the market. Oil prices have soared since the Ukraine invasion, with Brent crude hitting a 14-year intraday high of $139.13 a barrel in March, while WTI reached $130.50.
Russia's oil output has declined due to sanctions imposed over its war on Ukraine, and an EU-wide embargo would drive availability down even further, analysts say. Its average oil production dropped 6% in early April, compared with the March average, Reuters reported, citing sources.
While the US and the UK have stopped imports of energy from Russia, the EU has held back from a ban, given its dependency on the supplies.
But under existing EU sanctions, traders have been given a deadline of May 15 to stop buying crude from Russia's state oil company Rosneft unless "strictly necessary" for energy security.
The EU is seen as getting ready to propose a ban on Russian oil as soon as Tuesday, but it faces objections from Hungary and other member states reliant on energy from the country. The EU gets more than 25% of its crude oil from Russia, and about 40% of its natural gas — though for some member states, that rises to almost 100% of demand.
As European traders continue to seek alternative sources of supply, Russia's largest state-run oil producer Rosneft failed to sell 37 million barrels of its flagship Urals crude last week.
Looney's comments came after BP reported a loss of $20.4 billion in the first three months of the year, its biggest quarterly loss ever, on Tuesday.
A strong performance in its oil and gas division, helped by soaring energy prices, was enough to help lift its US-listed shares almost 5% in the premarket, even though its earnings were outweighed by a $24 billion writedown from the sale of its 19.75% stake in Rosneft.
BP is not alone in abandoning its Russian investments and operations in the face of the Ukraine war and related sanctions — and those exits by energy companies pose a serious problem for the oil market, according to energy expert Dan Dicker.
"From the long term, something far more serious is going on — and that is what's going on in Russia," the founder of The Energy Word told Yahoo Finance Live.
'And not only the bans that are likely coming from Europe that they seem to have a very long-term interest in making stick. The energy companies — Exxon, Total, BP — leaving Russia, stranding assets in Russia," he said.
Dicker noted that energy infrastructure in Russia has been dependent on Western energy companies getting the oil out of the ground, and it is now missing that extraction.
"That's going to be a long-term, systemic problem with production in Russia, which may ultimately lead to three million barrels a day of oil coming off the market, from the Russian markets. That's a very, very, very big deal for long-term prices," he said.
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