Russia-related energy market shock could tip world into recession: Vitol CEO

‘Markets will struggle to absorb potential loss of 2 mn barrels per day of oil from Russia’

The energy market shock following Russia's invasion of Ukraine could tip the world into an economic recession, especially if the war drags on, Vitol's chief executive said on Tuesday.

Even before Russia launched its invasion on February 24, energy markets had little spare capacity, and will struggle to absorb the potential loss of about 2 million barrels per day (bpd) of oil from Russia that competes with Saudi Arabia as the world's top oil exporter.

"The longer the war goes on, the greater the chance of an economic recession," Vitol CEO Russell Hardy told the FT Commodities Global Summit.

He said customers had told Vitol they did not want Russian crude and the trading firm has stopped spot purchases of Russian oil, although it has maintained existing longer-term contracts.

"Many people across Europe wish to boycott Russian flows... How that transpires into how much oil is lost, is still relatively unknown," Mr. Hardy said.

"We think 2-3 million bpd of Russian oil could be lost but a lot depends on Asia's reaction."

Any replacement oil is likely to be months away. Iran could increase exports by 1 million bpd provided a nuclear deal is signed, but the Organization of Petroleum Exporting Countries (OPEC) and its allies were unlikely to increase output faster, he said.