An EU ban on Russian oil would be a 'seismic shift' that erases 3 million barrels a day from the market, a top forecaster says

• Russian crude oil exports to the EU are set to drop by as much as 3 million barrels per day, according to Rystad Energy.
• The consultancy said the EU's plans to ban Russian oil would mark a "seismic shift" in global energy markets.

Russian oil exports to the European Union are likely to drop by around 3 million barrels per day under the bloc's embargo plans, in what would be a "seismic shift" for global markets, consultancy Rystad Energy has said.

Rystad said Russia would try to increase its sales to Asia to compensate, but would struggle due to physical constraints such as a lack of pipeline infrastructure, raising the prospect of a sharp fall in production.

The EU proposed a total ban on Russian oil imports last week as it seeks to ramp up the pressure over the war in Ukraine. Hungary is currently holding up the plan, but analysts think the bloc will reach some sort of compromise deal to slash purchases.

"The EU oil embargo will trigger a seismic shift in the European and global crude markets," Rystad's head of oil market research, Bjornar Tonhaugen, said in a note Monday.

Russian crude oil exports to the EU have averaged around 3 million barrels per day since the start of the year, Rystad said, but have fallen to around 2.7 million in March and April as buyers "self-sanctioned".

The consultancy said those exports would all but cease by the end of the year if the embargo was implemented in full. Under a less stringent ban, with more concessions given to the most reliant countries, exports could fall by 2.1 million barrels per day by December, Rystad said.

"The repercussions of the embargo would be comprehensive and wide-ranging, pushing oil prices higher in the short to medium term," Tonhaugen said. "As the sanctions are negotiated, crude prices will stay elevated."

Brent crude oil was down 2.19% to $109.93 per barrel on Monday. But the global benchmark price has risen more than 40% this year.

Tonhaugen said Russia would try to ramp up sales to Asia, but that the effort would not fully compensate for the lost exports. He said there are only two pipelines from Russia into the continent, which would constrain possible supplies.

Rystad said its base case was for India to increase its imports by 300,000 barrels per day and China by 200,000 barrels per day. Yet he said that, if Russian oil prices were to fall to a bigger discount to the benchmark dated Brent price than the current gap of around $35 a barrel, sales to Asia could increase by as much as 2 million barrels per day.

A ban could force Russia to shut down a significant amount of supply.

Russia produced around 11.3 million barrels of oil a day in January, of which 10 million was crude, according to the International Energy Agency. It exported 7.8 million barrels per day, of which 5 million barrels per day was crude.

Analysts broadly think Russian production has fallen by around 1 million bdp since the invasion of Ukraine. A top trader this weekend called the fall "a drop in the ocean compared to the intended impact."

Yet the situation is likely to become much more tricky for Russia. S&P Global, a financial analysis company, expects disruptions of 2.8 million bdp by August as the EU cuts ties with the country.