“OPEC+ is mulling firing its last crude production bullets as it runs out of capacity to pump more, whilst refining capacity for oil products ... which drives the real economy, has declined markedly,” said Ehsan Khoman from MUFG bank.
“Spare capacity is running very, very low,” Shell CEO Ben van Beurden said on June 29, adding that despite economic and COVID-19 challenges, global oil and gas demand is still recovering.
The Vitol-chartered vessel was shipping intermediate oil products including vacuum gasoil and fuel oil from Russia’s Taman port to New Orleans last week, according to a trading source and shipping data.
“The big unknown is Vladimir Putin’s reaction,” said Tamas Varga from oil broker PVM. If Putin decides to reduce oil or gas exports the plan will backfire and lead to a rise in prices: “It is a nightmare scenario—both for Europe and Russia.”
The announcements came as the White House said Russia had defaulted on its foreign sovereign bonds for the first time in a century—an assertion Moscow rejected.
“If this minus becomes so big that the companies can’t bear it anymore and they fall down, the whole market threatens to fall down at some point—so a Lehman Brothers effect in the energy system,” German Economy Minister Robert Habeck warned.
Biden will also call on states to temporarily suspend state fuel taxes and challenge major oil companies to come to a meeting with his energy secretary later this week with ideas on how to bring back idled refining capacity.
Since the start of the pandemic, companies that buy solar panels for large power plants have struggled with global supply chain disruptions that have driven up costs, as well as potential U.S. tariffs on imported panels from Asia.