IEA highlights key risks to global energy markets

Europe may have done a good job of reducing its dependence on Russian oil and gas and easing the energy crisis caused by the war in Ukraine, but it is “not out of the woods yet”, said to CNBC the head of the International Energy Agency (IEA). .

“Europe has been able to transform its energy markets, reduce its share of Russian gas to less than 4% and its economy has still not gone through a recession,” IEA executive director Fatih Birol said on Sunday. to CNBC’s Martin Soong.

“Europe’s emissions have come down…and gas storage is at very decent levels,” Birol said, speaking on the sidelines of the Group of Seven summit in Hiroshima, Japan.

Russia has traditionally played a pivotal role in the global energy complex, but Western nations’ dependence on the country’s energy has been drastically reduced as they continue to unveil new sanctions to punish Russia for its ongoing invasion of Ukraine.

“European countries did a good job…last winter,” the IEA chief said, noting that the region had managed to keep the lights on and avert a winter crisis, in part thanks to a winter milder than expected.

Birol warned that the global energy market still has three main hurdles to overcome this year.

1. Growing demand from China

Russian oil price cap

2. Dependence on Russia remains

3. US Debt Default

Players in the global energy market are also keeping a close eye on on the heated negotiations between the White House and the Republicans on the American debt ceiling. Without an agreement, the United States could face a default in early June, although this is considered unlikely.

Negotiations were halted while President Biden attended the G-7 summit in Japan, but he must feedback in Washington, DC on Sunday. President said at a summit press conference that he is “not at all” concerned about the negotiations and that “we can avoid a default and we will do something decent”.

Birol said a US debt default would lead to lower oil demand and prices, but agreed such a scenario was unlikely.

“I would avoid giving you a specific number, but one could expect a significant drop in the price of oil if we see such a default.”

“This issue in the United States will be dealt with and common sense will prevail. And I don’t see any major risk to global oil markets. But of course oil markets are always involved with risks.” he added.

Oil prices rebounded on Friday from losses of more than 1% the day before as investors grew cautiously optimistic that the risks of a US debt default were easing as talks continued. ..


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