Sanctions on Russia risk a 'global oil supply shock,' says International Energy Agency

• Western sanctions and diminishing demand for Russian exports could rattle global oil markets, said the International Energy Agency.
• "The prospect of large-scale disruptions to Russian oil production is threatening to create a global oil supply shock," the IEA warned.

Western sanctions paired with diminishing demand for Russia's oil exports could cause massive repercussions across global markets, according to the International Energy Agency.

Buyers are abandoning Russia as sanctions weigh on the nation's oil output, and this could catalyze the "biggest supply crisis in decades," the IEA said Wednesday.

"The prospect of large-scale disruptions to Russian oil production is threatening to create a global oil supply shock," the energy watchdog wrote in its monthly report.

Russia is the world's third-largest producer of oil, and the top exporter of oil and oil products. So far, the US and Canada have banned imports of its oil, and the UK said it will slowly begin to wean off Russian oil. The rest of Europe has not done so, however, as it is highly dependent on Russian oil.

Meanwhile, the private sector has gone even further via so-called self-sanctioning. The IEA said that many major companies and banks are ceasing business operations with Russia for reputation purposes and concern over future sanctions, and that new business prospects have "dried up."

According to the IEA, upwards of 2.5 million barrels per day of exports could be at risk, though any alleviation of war could ease shortages.

Oil prices rebounded Wednesday but plunged from recent highs earlier this week. Analysts at UBS expect tighter supplies to push the commodity back to $125 within months.