IEA sees potential for Russia oil export workarounds amid sanctions

The International Energy Agency (IEA) suggested that Russia might find ways to maintain its oil exports despite the latest sanctions imposed by the United States.

According to the IEA’s monthly report, Russian crude production increased by approximately 100,000 barrels per day (bpd) to 9.2 million bpd last month, even after facing significant sanctions starting on January 10.

The IEA indicated that the resilience of the oil market could lead to the emergence of new methods to sustain Russian export volumes in the weeks ahead.

Previously in January, the IEA had expressed concerns about the potential for U.S. sanctions to disrupt Russian oil supply chains significantly. However, they refrained from adjusting their forecasts until they could assess the impact more clearly. Despite initial worries, the IEA noted that the global oil supply is anticipated to grow faster than demand in 2025.

They revised their global demand growth forecast upward slightly to 1.1 million bpd from 1.05 million bpd, while supply is expected to rise by 1.6 million bpd, led by the Americas.

Oil prices had a strong start to 2025 due to the sanctions announcement and the possibility of supply cuts, with Brent crude reaching over $82 a barrel on January 15, the highest since August 2024. Nonetheless, by the end of January, oil gains were largely erased amid concerns about the global economy and potential impacts from emerging trade wars. The IEA has become more cautious since March 2022 regarding the effect of sanctions on Russian supply. Initial predictions of a 3 million bpd reduction in Russian supplies due to Western sanctions and buyer reluctance were not fully realized, leading to revised forecasts by the IEA.

Three years into the conflict in Ukraine, Russia has managed to withstand multiple rounds of sanctions, with countries like India and China increasing their purchases of discounted Russian oil. In response to January’s sanctions, Russia has reportedly been seeking smaller vessels to support its so-called shadow fleet.

The IEA’s report also touched on the current state of global oil demand, which remains driven by China, particularly its petrochemical sector, as the country’s demand for conventional transport fuels begins to slow. The IEA observed that China’s fuel use may have already peaked, considering the marginal decline in gasoline, jet/kerosene, and gasoil consumption in 2024.

OPEC+ has been implementing cuts since 2022 to bolster the market and has repeatedly postponed increasing output due to weak demand and a rise in supply from outside the group. The coalition’s current plan is to start easing its latest round of cuts from April.

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