IEA states there is "plenty of oil" in markets, but warns of potential "gas bidding war"
Kyiv • UNN
International Energy Agency Director Fatih Birol stated there is a "huge surplus" of oil in the markets, but warned of a potential "gas bidding war" due to the conflict in the Middle East. Oil prices have risen by 50% since the beginning of the year, and the Strait of Hormuz is effectively closed to tankers.
Fatih Birol, Executive Director of the International Energy Agency (IEA), sought to allay fears of a global oil crisis amid escalating conflict in the Middle East, stating that there is "plenty of oil" in the markets due to a "huge surplus," but warning of a likely gas bidding war, according to The Guardian and AP, writes UNN.
On oil reserves
There is plenty of oil, we don't have an oil shortage. There is a huge surplus in the market. We are facing temporary disruptions, logistical disruptions.
This comes amid reports that fuel oil traders in Asia are trying to secure alternative supplies, as the US-Israel war against Iran and Tehran's retaliatory strikes reduce supplies from key Middle Eastern suppliers through the Strait of Hormuz, through which approximately one-fifth of the world's oil is transported.
The price of oil is on track for its largest weekly increase in four years, fueling fears of a surge in inflation that will reignite the cost of living crisis and harm economic growth worldwide, the publication notes.
As CNN notes, oil prices continue to rise sharply, having already jumped by 50% since the beginning of the year, amid the de facto closure of the Strait of Hormuz, blocking the flow of energy from the Middle East.
US oil prices rose another 6% to $85.85 per barrel in recent trading. Today, the price of oil reached $86.22 per barrel, the highest intraday price since April 2024. This followed a nearly 9% jump on Thursday, the largest single-day increase since May 2020.
"Oil prices have risen by 50% since the beginning of the year, with most of this increase occurring during the build-up of US military power in the Middle East. The price of oil has risen by 28% since Friday alone, the last day before the war began," the publication notes.
At the same time, according to energy analysts cited by CNN, oil storage facilities in the Persian Gulf region are filling up, and oil exports have practically stopped.
Practically no tanker risks transit through the Strait of Hormuz, which borders Iran on one side, due to fears of Iranian drone or missile attacks.
As storage facilities fill up, the risk of having to cut oil production increases.
"Saudi Arabia, long considered the unwavering (oil) shock absorber of the Persian Gulf, will face forced production cuts within a week," Rystad Energy, a research and analytics firm, said in a note on Thursday. In addition to Saudi Arabia, the Persian Gulf region includes Bahrain, Kuwait, Oman, Qatar, and the United Arab Emirates.
If the conflict drags on, "triple-digit oil prices will become a very real possibility," Aditya Saraswat, a senior analyst at Rystad Energy, said in a note. "We could start to see precautionary production shutdowns across the region, which would have serious consequences for global oil markets," Saraswat added.
With storage reserves measured in days, not months, the question for most Persian Gulf oil producers is not whether they will have to cut production, but when, according to Rystad Energy.
Natasha Kaneva, head of global commodity strategy at J.P. Morgan, also believes that production restrictions could quickly increase, and estimated that for every million-barrel-per-day reduction in oil production, the price of benchmark oil increases by $4.
On Tuesday, Reuters, citing two Iraqi oil officials, said that Iraq had already cut oil production by almost 1.5 million barrels per day and that these cuts could extend to over 3 million barrels within days, as the country runs out of storage and cannot export oil due to the conflict.
Regarding gas
Meanwhile, the head of the IEA warns of a likely gas bidding war, stating that the conflict in Iran has halted Iranian gas exports, mainly to Asian markets, and if this halt prolongs, it will likely lead to a bidding war between Europe and Asia, with energy prices soaring.
If the crisis continues in this way, Asian buyers and European buyers will have to compete for LNG, which will be scarce. So it will be a challenge for European countries if the crisis continues in the coming days or weeks.
Qatari Energy Minister Saad al-Kaabi, as noted by The Guardian, said earlier today that it could take "weeks or months" for energy exports to return to normal levels, even if the war ends immediately, after an Iranian drone strike on the country's largest LNG plant.
He warned that the conflict in the Middle East could "undermine the world economy," as the world's second-largest LNG producer was forced to declare a so-called force majeure, where a company is released from contractual obligations in the event of extraordinary circumstances beyond its control.
Although a small portion of Qatari gas is exported to Europe, he said the continent would suffer as Asian buyers would offer higher prices than European buyers for the gas available on the market.
"If this war lasts for several weeks, it will affect GDP growth worldwide," Al-Kaabi told the Financial Times. "The price of energy for everyone will increase. There will be a shortage of some products, and this causes a chain reaction: factories will not be able to ensure supplies."