The International Energy Agency said that global oil demand will fall this year for the first time since the 2020 COVID pandemic, as rising prices caused by the conflict in the Middle East wipe out that growth, UNN reports with reference to Bloomberg.
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"The war in Iran has completely upended the global oil consumption outlook," the IEA said in its monthly report. "Demand destruction will spread as shortages and higher prices persist."
The conflict has choked off oil supplies through the vital Strait of Hormuz in the Persian Gulf, causing what the IEA called the biggest supply disruption in history.
War with Iran became the biggest threat to energy in history - IEA20.03.26, 20:10
Rising prices for crude oil and products such as jet fuel, diesel, and gasoline are squeezing consumers and negatively impacting demand.
Last month, the IEA oversaw the release of a record 400 million barrels from its members' emergency oil reserves, including the US, Japan, and Germany, in an attempt to curb soaring costs.
IEA approved the largest oil reserve release in history11.03.26, 16:35
Oil and product shipments through the Strait of Hormuz have fallen to just 3.8 million barrels per day, compared to pre-crisis levels of about 20 million, or roughly 20% of global supplies, according to the agency.
Global oil supplies last month fell by 10.1 million barrels per day, or about 9%, as Saudi Arabia, Iraq, the United Arab Emirates, and Kuwait were forced to halt production, the IEA said. A blockade of vessels entering or leaving Iranian ports, announced by US President Donald Trump, took effect on Monday.
US begins full military blockade of all Iranian ports - media13.04.26, 18:47
While oil futures saw an unprecedented surge in March, they remain significantly below record levels and the price of actual cargoes, trading just under $100 a barrel in London. This "disconnect" between futures and physical markets is becoming "increasingly acute," according to the report.
IEA Executive Director Fatih Birol said on Monday that oil futures still do not reflect the severity of the crisis, but soon will.
The agency's report, released on Tuesday, showed that previously expected global demand growth of 730,000 barrels per day had been erased, with consumption now set to contract by a modest 80,000 per day.
Several governments have implemented oil conservation measures: the Philippines declared a national emergency, Pakistan announced austerity measures, Bangladesh cut office hours and closed universities early, and airlines in Vietnam and other countries canceled flights. Meanwhile, gas stations in Africa faced shortages.
"Petrochemical feedstocks are showing the most immediate impact of the war, as the Strait of Hormuz blockade has disrupted supply chains to Asia," the IEA said.
The baseline scenario assumes that regular oil supplies from the Middle East will largely resume by mid-year, but a scenario with longer disruptions is also presented.
"In that case, energy markets and economies worldwide must prepare for significant disruptions in the coming months," the IEA warned.
Oil prices likely to peak in coming weeks - US Energy Secretary14.04.26, 08:43