Paris, France. The International Energy Agency said the war in the Middle East is creating the biggest oil supply disruption in history. The agency warned global supply could fall sharply as shipping through the Strait of Hormuz remains blocked.
Supply outlook and Strait of Hormuz
Global supply is expected to drop by 8 million barrels per day in March, the IEA said in its latest monthly oil market report. The agency attributed the decline to the blocking of the Strait of Hormuz, a narrow channel along the Iranian coast, since the U.S. and Israel began a campaign of airstrikes on Iran on February 28.
Production cuts in Gulf countries
Middle East Gulf countries including Iraq, Qatar, Kuwait, the United Arab Emirates and Saudi Arabia have cut total oil production by at least 10 million bpd, the IEA said. The agency said this volume is equal to almost 10% of world demand.
The IEA said that without a rapid restart of shipping flows, the losses were set to increase. It added that shut-in upstream production would take weeks and, in some cases, months to return to pre-crisis levels depending on field complexity and the timing for workers, equipment and resources to return to the region.
Strategic stockpile release
The IEA said it agreed on Wednesday to release a record 400 million barrels of oil from strategic stockpiles held by member nations to combat a spike in global crude prices since the start of the U.S.-Israeli war on Iran. The agency said the U.S. would contribute the bulk of the supply.
Oil prices and attacks
Oil prices rose on Thursday as Iran stepped up attacks on oil and transport facilities across the Middle East, raising fears of a prolonged conflict and continued oil-flow disruptions through the Strait of Hormuz.
Brent crude LCOc1, which hit $119.50 a barrel on Monday, its highest since mid-2022, was up more than 6% on Thursday at just below $98 a barrel.
How do you expect the strategic stockpile release to affect oil prices in the coming weeks?
