Russell Hardy, speaking at the International Energy Week conference in London, detailed significant disruptions in global oil flows and market tightness driven by geopolitical pressures.

Stranded Russian Oil and Shifting Trade Flows

Western pressure on buyers of Russian crude has led to approximately 40 million barrels of Russian oil being stranded on tankers at sea over the past 60 days, equivalent to about one million barrels per day not reaching refineries. This situation has intensified following discussions between the US and Indian leadership, which caused a further decline in Indian imports of Russian oil. Hardy stated that this "really only leaves China as a home" for Russia's exports. Concurrently, traditional buyers of both Russian and Iranian crudes are now seeking more Western or Saudi Arabian grades, which is tightening the physical market.

Production, Revenues, and Geopolitical Pressure

Despite these trade disruptions, Russia continues to produce crude at levels close to those prior to its February 2022 invasion of Ukraine. Producers are reluctant to shut in production, preferring to load cargoes and then seek buyers, leading to an "enormous amount of oil building on the water" that has influenced market sentiment and prices. However, Russia's oil and gas revenues fell sharply in December due to weaker prices and increasing US sanctions. Hardy cautioned that "cracks are beginning to appear," with geopolitics exerting significant pressure on the supply side. In contrast, he noted a more positive supply outlook for Venezuela, whose crude is available under licence to US players.

Market Evolution and Future Uncertainties

Hardy highlighted the growing importance of liquefied natural gas (LNG), which he described as a flexible commodity that can move globally to satisfy short-term demand spikes, similar to crude oil. He noted that about a third of his company's business is now in non-oil sectors, a strategic position given that future energy growth is likely to occur outside petroleum. Looking ahead, Hardy identified geopolitics as the critical "unknown unknown" for 2026 and beyond, emphasizing that the outcomes of the Russia-Ukraine conflict and Middle East tensions are market-moving factors due to the large oil and gas supplies involved. These situations must be watched carefully as they are very influential on prices.