The imposition of U.S. sanctions on Russia and Iran has resulted in an unprecedented increase in the volume of crude oil stored in tankers. According to Torbjörn Törnqvist, co-founder of the commodity trading giant Gunvor Group, this situation has led to significant dislocation in the oil market. Speaking at the ADIPEC energy conference in Abu Dhabi, Törnqvist noted, “If all sanctions would disappear, this market would clearly be quite oversupplied.”
The sanctions have created an “enormous amount” of crude oil that is currently displaced, with much of it being held on tankers around the world. This oversupply is contributing to reduced volatility in the oil market, but the situation remains fluid as sanctions continue to reshape trade dynamics. Gunvor is also positioned to acquire the international business of Russian oil giant Lukoil, following the U.S. sanctions that complicate dealings with major Russian oil firms.
At the same conference, Marco Dunand, the CEO and co-founder of Mercuria, echoed Törnqvist’s concerns, predicting that supply could exceed demand by as much as 2 million barrels per day (bpd) next year. However, he cautioned that the implementation of sanctions is a significant variable in estimating this overhang. “That probably means that from a 2 million barrels a day surplus we move more into the 1 million barrels a day surplus,” Dunand stated.
The outlook for the oil market is complicated by contrasting views on inventory levels. While some analysts anticipate a substantial glut, others predict more modest increases in inventory during the traditionally weaker demand phase at the beginning of the year. The impact of U.S. sanctions on Russian oil companies remains one of the largest uncertainties affecting these predictions.
As the market braces for potential oversupply, the extent of the situation will likely become clearer in the coming months. The interplay between stored oil and demand will continue to shape the dynamics of the global oil market, making it a critical area to monitor for stakeholders across the industry.
The current landscape of crude oil storage reflects broader geopolitical tensions and highlights the shifting nature of international trade in energy resources. With the potential for a significant surplus on the horizon, market participants must navigate the complexities introduced by sanctions and global supply chains.
