Vitol chief executive Russell Hardy has been sharing his thoughts on the energy disruption caused by Russia’s invasion of Ukraine.
The boss of the low-profile trading, chartering and shipowning giant was speaking at the Asia Pacific Petroleum Conference (APPEC) 2022 in Singapore.
Hardy said Russia’s gas supply cuts have placed a big strain on the European market, with high gas prices expected to affect between 60% and 80% of demand.
He said Europe is also going to need more infrastructure for LNG discharges, as what the continent has now is “basically full”.
“We’re going to need more supply but the slots are more important at the moment because the need is immediate,” Hardy said.
Global gas prices rose to record levels this year as Russia cut supplies to Europe.
Turning to oil markets, Hardy said the war has pushed sustainability concerns down the agenda for governments, Reuters reported.
Hardy said: “Energy security is number one. Price is number two. Sustainability is number three.”
The Vitol boss expects more than 1m barrels per day (bpd) of US crude to head to Europe to fill the gap in Russian supplies when the European Union ban kicks in.
He said Russian commodities would need to find a home in places outside the UK, US and Europe.
Longer and cheaper
“It’s going to go further and longer distances and find different markets, and in doing that it’s going to have to trade at a discount,” Hardy said.
“You’re beginning to see that with fuel coming East that would otherwise have stayed in Europe, and fuel in the East going to the West to cover the shortfall.”
Russian crude oil imports into the European Union and UK fell to 1.7m bpd in August, down from 2.6m bpd in January, according to data from the International Energy Agency.
However, the EU was still the biggest market for Russian crude at that point.